• Menu
  • Skip to main content
  • Skip to secondary navigation
  • Skip to primary sidebar
  • Skip to footer

Before Header

  • About
  • Contact
  • Privacy
 
Ametros

Amaxx Workers Comp Blog

Reduce Workers Compensation Costs By 20-50%

Header Right

  • Home
    • Training Center
  • Search
    • Free Resources & Solutions
    • Subscribe to Free Newsletter
    • Create Free Training Center Account
    • Enroll in On-Demand Courses
    • Activate WC Mastery Membership
    • Request Strategic Coaching Session
    • Buy WC Guidebooks
  • Membership
    • Insider (free account)
    • WC Mastery
    • Teams & Managers Mastery
    • Training Partners
  • Products
    • On-Demand Courses
    • Specialty Courses
    • Certifications & Mastery Courses
    • Ultimate Guidebooks
    • Coaching
  • Blog
    • Video Blogs
    • COVID-19 / Coronavirus Pandemic
  • Login

Mobile Menu

  • Home
    • Training Center
  • Search
    • Free Resources & Solutions
    • Subscribe to Free Newsletter
    • Create Free Training Center Account
    • Enroll in On-Demand Courses
    • Activate WC Mastery Membership
    • Request Strategic Coaching Session
    • Buy WC Guidebooks
  • Membership
    • Insider (free account)
    • WC Mastery
    • Teams & Managers Mastery
    • Training Partners
  • Products
    • On-Demand Courses
    • Specialty Courses
    • Certifications & Mastery Courses
    • Ultimate Guidebooks
    • Coaching
  • Blog
    • Video Blogs
    • COVID-19 / Coronavirus Pandemic
  • Login
  • About
  • Contact
  • Privacy
You are here: Home / Claim Management / TPA and Claims Administration / Why Under Reserving Can Lead to Problems

Why Under Reserving Can Lead to Problems

July 3, 2014 By //  by Michael B. Stack Leave a Comment

Running a business in today’s economic world involves various factors that can keep even the best of business men and women awake at night.

One of the keys to any successful business operation is making sure that the financial ledger stays in the black and does not dip into the red. If it does the latter, getting it out of there as quickly as possible is crucial.

With that in mind, under reserving is a topic that all businesses should be aware of.
To put things in perspective, keep in mind that a workers compensation claim is in fact a legal obligation. In turn, a claim reserve is a prepared estimate for what the workers comp claim will in fact cost.

Click Link to Access Free PDF Download

“How Do I Get My Adjusters To Follow My Account Handling Instructions?”

At the point where the adjuster overseeing the workers comp claim places a reserve on the claim file, it then is a definite monetary figure that is set aside to compensate the expense down the road of the workers comp claim.
In viewing things through the accounting window, the claim is an incurred liability, this even though it will be paid down the road. At the time the adjuster establishes the reserve, the business is then denied the ability to use a monetary figure that was set aside to compensate the workers comp claim.

When Reserves Go Bad

A company’s financial status will change at the point when there are inaccurate reserves.
In cases where you have reserves at too high a level, funds the business could put to use in other avenues of the company prove no longer available. In instances where the reserves turn out to be too small, the business must deal with an under-funded liability, leading to a shortfall over time.

So, what is the worst scenario of the two presented?
In many cases, financial experts will state that being in an under-reserving position is the worst of the two scenarios, with a simple reason being that the self-insured business owner or the insurer itself needs to have reliable reserves in hand to handle their financial responsibilities.

Ratings Can Be Impacted

Another reason why this can hurt businesses, especially the insurer itself, is company ratings.

The better-known rating firms like A.M. Best, Standard & Poor’s, and Fitch Ratings calculate the monetary stability of insurance companies by gauging their ability to meet their claim responsibilities. If their available surplus falls to an unacceptable level, their financial stability rating falls too.

FREE DOWNLOAD: “How Do I Get My Adjusters To Follow My Account Handling Instructions?”

Another thought to keep in mind regarding under reserving is the impact on the calculation of premiums down the road.

The reserves for the open claims are a portion of the calculations in establishing the loss experience of the business. In the event a loss experience is under stated due to the fact the reserves are understated, the insurer will be charging inadequate premiums.

When this happens, you end up with lower profits for the business.

Author Michael B. Stack, CPA, Principal, 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. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

WORK COMP CALCULATOR: http://www.LowerWC.com/calculator.php

MODIFIED DUTY CALCULATOR: http://www.LowerWC.com/transitional-duty-cost-calculator.php

WC GROUP: http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

FREE DOWNLOAD: “How Do I Get My Adjusters To Follow My Account Handling Instructions?”

Filed Under: TPA and Claims Administration

Related Articles

Select the Workers’ Comp Claims Administrator

Select the Workers’ Comp Claims Administrator

Effective Management of Service Providers to Reduce Workers’ Comp Costs

Effective Management of Service Providers to Reduce Workers’ Comp Costs

Details of the Third Party Administrator Service Agreement

Details of the Third Party Administrator Service Agreement

Deny That Claim! Workers Compensation Claims You Can (and Should) Deny

Deny That Claim! Workers Compensation Claims You Can (and Should) Deny

Selecting the Correct Workers’ Comp Third-Party Administrator

Selecting the Correct Workers’ Comp Third-Party Administrator

How Many Claims is Too Many For Your Adjuster?

How Many Claims is Too Many For Your Adjuster?

Why Every Employer Should Request Their Account Handling Instructions

Why Every Employer Should Request Their Account Handling Instructions

Searching For The Right TPA Critical Step in Self-Insurance

Searching For The Right TPA Critical Step in Self-Insurance

22 Things Your Workers’ Compensation Adjuster Should Not Do

22 Things Your Workers’ Compensation Adjuster Should Not Do

Benchmarks to Measure Your Workers’ Comp Claim Performance

Benchmarks to Measure Your Workers’ Comp Claim Performance

How To Be An Effective Claims Supervisor

How To Be An Effective Claims Supervisor
Hospitals Nursing Homes Workers Comp

Understanding Work Comp in the Healthcare Industry

Understanding Work Comp in the Healthcare Industry

Free Download

How Do I Get My Adjusters To Follow My Account Handling Instructions? - FREE Download Click Here Now!

Train to Succeed

BECOME CERTIFIED IN WORKERS’ COMPENSATION

Proven Course Catalog & WC Toolbox Give You The Power To Achieve Lower Costs and Better Injured Worker Outcomes

VISIT WORKERS' COMP TRAINING CENTER

Previous Post: « Ohio BWC Nabs More Than Dozen Fraud Suspects
Next Post: California Senior Pleads Guilty to Comp Fraud »

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

FREE DOWNLOAD

How Do I Get My Adjusters To Follow My Account Handling Instructions? - FREE Download Click Here Now!

Our Sponsors

ARCADIA - Enhancing Settlement Outcomes

The Structured Settlements Company
 

Catastrophic and Risk Solutions, Case Management Solutions, and Specialty Networks
 

MSAs, Section 111 Audits, & Conditional Payment Resolutions
 

Post-Settlement Administration
 

Medcor

Injury Triage, Onsite Clinics

Read Our Award-Winning Blog

Blog Categories

Search Our Archive

Subscribe to Our FREE Newsletter

Return-to-Work Essentials

Footer

Search Our Archive

Search our continually growing archive of over 2500 articles about Workers' Comp issues.

Quiclinks

  • Calculators
  • Terms & Abbreviations
  • Glossary of WC Premium Terms
  • WC Resources
  • Best Practices
  • Industries
  • Return-to-Work Essentials

RSS Recent Blog Posts

  • WC Cost Containment For The Claims Management Team
  • Dealing with Long COVID in Work Comp
  • Common Mistakes: Medical Care and Accepting Every Claim – Article 3 of 3
SUBSCRIBE TO OUR FEE NEWSLETTER
Let Us Help You Stomp Down the High Cost of Workers' Comp!
Top of Page ↑
  • Home
  • Training Center
  • Search
  • Membership
  • Products
  • Blog
  • About
  • Contact
  • Subscribe
  • Login
Copyright © 2023 Amaxx, LLC. All Rights Reserved. · Privacy Policy / Legal Notice