The Strategic Importance of Proactive Claim Reviews
In the intricate landscape of workers’ compensation, managing claims efficiently is more than a necessity—it’s a strategic operation that directly influences a company’s financial health and risk management. Failure to proactively manage workers compensation claims can has negative outcomes from increased litigation to increased costs. As a best practice we recommend quarterly claim reviews whether your business is having claims or not.
Here’s the details.
At Mod Advisor we took a small dataset that reflects recent data from the past few months which contained 32,000 claims. This data set is for insurance policies renewing after Jan 1, 2024.
This information has unearthed a critical insight:
- Out of the 32,000 claims, there were roughly 29,500 closed claims and 2,500 open claims.
- The incurred amount of open claims account for a disproportionate 50% of the total incurred losses, summing up to approximately $200 million.
- The average incurred claim amount for closed claims was about $7,000 per claim whereas the incurred amount for open claims was about $81,600.
This disparity significantly affects the experience modification (mod) rate, a crucial factor in insurance premium calculations. This article delves deep into the importance of regular claim reviews, outlining how they can mitigate unexpected financial strains and optimize the mod rate.
Here’s the data:
Understanding the Experience Mod and Its Impact
The experience mod rate functions as an indicator for past injury costs and future risk probabilities, thus influencing the insurance premiums a business pays. An unfavorably high mod rate can steeply elevate the work comp premium costs. For instance, open claims, although few, carry substantial reserved losses. Without rigorous, systematic claim reviews, businesses risk facing inflated experience mod rates that could have been moderated or even significantly reduced. Understanding the mechanics behind mod calculations will highlight the financial implications and underscore the need for diligent claim management. To find out more on how your experience mod is calculated, check out this article.
The Crucial Role of Timely Claim Reviews
Here is a sample recommended timeline for claim reviews and why the timeliness is important.
90 Days Post-Renewal: Initial Review and Unistat Reporting
- Three months after policy renewal is critical for reviewing claims because this data is reported and used in unistat reports, which directly influence experience mod rate recalculations. Businesses must assess and address these claims to correct discrepancies that could unfavorably affect their mod rate. Communication with the injured worker and claims adjusters can directly affect open claims.
180 Days Post-Renewal: Strategic Assessment and Forecasting
- This mid-year checkpoint is ideal for evaluating the initial half-year’s data against projections. Companies should leverage this to review current risk management strategies. This is also a great time to update the forecasted experience mod calculation in mod advisor with audited payroll and existing claim informaiton. This helps in accurate budgeting and strategic planning, ensuring financial forecasts align with actual risk exposures.
270 Days Post-Renewal: Market Preparation and Mod Verification
- As businesses prepare to enter the renewal cycle and potential marketing efforts, the claims data available at this stage becomes invaluable. This review ensures that businesses have the correct data to negotiate better terms and adjust their coverage needs based on the verified experience mod report.
At Renewal: Comprehensive Review and Future Planning
- Discussing detailed claim data at renewal provides a holistic view of the past year and sets a base for the coming year’s strategy. This session should align all stakeholders—businesses, brokers, and carriers—ensuring mutual understanding and preparedness for the next policy term.
Proactive Claims Management: The Business-Broker Partnership
The efficient closure of claims often doesn’t rest with adjusters due to their extensive caseloads and the inherent delays in information. The primary responsibility, therefore, must fall on businesses and their brokers. A robust partnership between these entities is essential for effective claims management. Businesses must adopt a proactive stance, facilitated by their brokers, who are instrumental in navigating through the claims process.
This comprehensive analysis and discussion underscore the undeniable importance of systematic, periodic claim reviews in controlling the experience mod rate and managing workers’ compensation costs. By engaging in proactive claims management and fostering a strong partnership with brokers, businesses can achieve significant financial savings and secure more favorable insurance terms.
The call to action for businesses is clear: embrace disciplined, strategic claim reviews as an integral component of your broader risk management strategy. This proactive approach will not only safeguard against unforeseen financial burdens but also position your business for operational and financial success.
Need Help?
At Mod Advisor we help business, brokers, and insurance carriers nationwide analyze workers compensation claims. Our goal is to educate on how the system works and provide actionable insights that can be used to reduce our eliminate workers compensation claims all together. Everyone wins with a safer work environment. We see best in class organizations and those who struggle. No matter where you are in your journey, we want to help. Feel free to reach out to use here.