Employers are always looking for ways to increase workplace safety and to reduce workers comp insurance premiums. Carefully reviewing and analyzing workers comp insurance loss runs is one way to accomplish this.
Loss runs are essentially a data summary of claims an employer has. Loss runs contain a gold mine of information for the astute reviewer. Correctly mining that information can lead to a treasure trove of beneficial changes.
First, it is worth knowing what typical workers compensation insurance underwriters are looking for when they review loss runs. Underwriters are looking at the frequency of claims; in other words how many claims show up in a given time period (while considering the size of employer and risk of the occupations).
Additionally, underwriters are reviewing the severity of claims on a loss run. Severity of claims is typically measured by the cost of the claims present on a loss run. While detailing how experience modification ratings are calculated is beyond the scope of this article, frequency and severity of claims are the primary drivers of a company’s experience modification ratings. Furthermore, “E-Mods” are significant contributors to the cost of a company’s workers comp insurance premium.
A basic question is how to get loss runs. Loss runs can be requested directly from an insurance carrier. Employers will generally need to obtain three to five years of loss runs when they are shopping for insurance. Prior insurance carriers are required to provide loss runs promptly upon request. Loss runs must be requested from each prior insurance carrier if an employer has had multiple carriers in the most recent three to five year period.
One thing that I find particularly helpful to do when reviewing loss runs is to look for patterns in the types of claims. For example, perhaps an employer has a frequency issue; in other words too many claims. If all (or most) of those claims are slips and falls or muscle strains; specific preventative/protective measures can be implemented or additional employee training can be provided. This can create a safer workplace and directly lead to less workplace injuries.
Additionally, such targeted preventative measures may convince an underwriter to provide better pricing on future workers comp insurance premiums if the underwriter can be convinced that future losses will be better than predicted by simply reviewing a past loss run.
Another thing an employer can do is to review a loss run to make sure that information is presented as accurately as possible and that favorable steps to influence how the loss run is viewed have been taken. Open claims should be noted, and it is important for an employer to make sure that open claims are really still open or if they can be closed. Also, the amount of reserves allocated to open claims should be assessed.
While I would not suggest approaching an adjuster every time the amount of reserves looks out of line, this can be an important tool in cases where the dollar amounts are substantially out of line based on changed information. Ultimately, getting reserves reduced (when appropriate) can improve an employer’s loss ratio. Also, recently closed claims should be reviewed for accuracy. In a similar vein, it is important that credit for any subrogation efforts by an insurance carrier are reflected on the loss run.
This article has provided tips on how employers should use loss runs and how they can make sure their loss runs reflect in the most positive light possible to underwriters who may be reviewing them.
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