An Independent Claims Audit Can Be The Answer To Poor Claims Handling


Poor Claims Handling Will Always Result in Higher Claim Costs 


Self-insured employers can have a good safety program, an established return-to-work program and knowledgeable nurse case managers, and still pay way too much on their workers’ compensation claims.  Ineffective claims management can wipe out most or all of the cost savings achieved through your efforts to control cost.  Whether you have your own claims office, or have a third party administrator (TPA) handling your workers’ compensation claims, poor claims handling will always result in higher claims costs.



Need to Know If Following Best Practices


The challenge for the risk manager is to know whether or not the work comp claims are being handled properly.  The risk manager can personally be involved in each claim for compliance with the Best Practices for Workers’ Compensation claims guidelines, but that defeats the purpose of having company claims adjusters or a TPA if the risk manager has to direct all the work on the claims.


An alternative approach is to have the claims supervisor or claims manager review each claim file for proper claims handling, but that often results in minimal improvement.  The claims supervisor or claims manager has a vested interest in not pointing out what could be construed as their failure to properly manage the claim adjusters. (WCx)



Determine If You Need An Independent Claims Audit


The best solution to determine the quality of the claims handling is to bring in an independent claims auditor.  The independent claims auditor has no conflict of interest when reviewing the claim files and can provide an unbiased evaluation of the quality of your claims handling.  Here is a checklist to determine if you need a claims quality audit.


[  ]     You have noticed deviations from your Best Practices guidelines


[  ]     You have noticed gaps in the investigation of claims


[  ]     Information that should have been known during the initial investigation of the claim turns up later in the life of the claim


[  ]     The adjusters are not staying current on their diary system


[  ]     You have received an inquiry from the Industrial Commission, Work Comp Board, or Insurance Commissioner’s office


[  ]     You have received complaint calls from employees or from the employees’ supervisors or managers


[  ]     Your claim cost is increasing faster than the rate of inflation


[  ]     The average age of your claims is increasing


[  ]     Your claims are open longer on average than your industry’ average


[  ]     Your loss run contains errors on loss location, injury description, type of claims


[  ]     Your claim reserves are being stair-stepped (many reserve changes on one file)


[  ]     Your actuary’s recommended reserves differ significantly from the reserve on the files


[  ]     You have noticed significant reserve increases right before claim settlement


[  ]     You have noticed missed subrogation opportunities


[  ]     You have noticed experienced adjusters being replaced with adjuster trainees or significant personnel turnover in the claims office


[  ]     The adjusters have high caseloads (WCx)



If You Checked One or More Above, Contact Us


If you checked one of the above categories you should consider an independent claim file audit.  If you have checked two or more of the above categories you need a claim quality audit.  Give us a call and we will be glad to assist you in arranging an independent claims audit.




Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%Contact:


Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. Contact






Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.


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