Lower Your Workers’ Comp Costs by Reviewing Claim Reserves
When an employee files a workers’ compensation claim, the insurance company sets aside money to cover the estimated total cost of that injury. This amount is the claim reserve.
While every claim is different, this reserve has a direct and significant impact on your premium. If the reserve is set too high, you are paying for costs that may never occur.
How Reserves Directly Impact Your Premium
Your insurance premium is heavily influenced by your company’s “incurred losses.” This isn’t just what the insurer has already paid out; it’s a combination of two figures:
- Money Already Paid: The sum of medical bills and lost-wage payments made to date.
- The Claim Reserve: The money set aside for all expected future costs until the claim is closed.
An excessive reserve inflates your total incurred losses, which in turn drives up your premium. This makes a regular review of your open claims essential.
The Solution: A Proactive Reserve Analysis
You have the ability to challenge and reduce unnecessarily high reserves. The process is straightforward and data-driven.
Your advisor should analyze claims with significant open reserves by comparing the case details against established medical recovery guidelines. We examine two key areas:
- Length of Disability: Is the employee’s time away from work consistent with the typical recovery period for that specific injury?
- Treatment Plan: Do the proposed medical treatments align with standard, effective procedures?
If a claim’s timeline or treatment plan deviates from these benchmarks, it’s a clear signal that the reserve may be too high. Armed with this data, your advisor can open a professional dialogue with the adjuster to present the facts and request a reduction. This evidence-based approach is the most effective way to lower reserves and control your workers’ compensation costs.