Why do reserves change?
Claim reserves are the estimated cost to resolve existing claims and are established by the claims adjuster. It is important to note that reserves for unpaid claims are counted as if they have been paid in calculating the Experience Modification Factor and therefore are an important determinant of your Workers’ Compensation costs.
Reserves should be set based on the most likely outcome of the claim, following the claim investigation. Estimates of the amount of time the injured employee is expected to be out of work, indemnity payments, cost of medical care, rehabilitation and legal expenses are all factors used to determine the estimated reserve.
Reserves can change for a number of reasons. There can be a failure to grasp the full significance of a claim and to plan an appropriate resolution. The adjuster is merely adjusting to events as they unfold. It’s also possible that the employee is not motivated to return to work and has developed a “disability attitude” or that there is no return-to-work program in place to accommodate the worker’s restrictions.
Proper management of claims is important not only to reduce costs, but also to identify cases that are malingering or may have reserves set too high. Certified WorkComp Advisors are trained to understand your business and monitor reserves to be sure that they precisely reflect the particular situation and receive the attention they need.