Why Is The Total Incurred Amount So Important? - Workers Comp Premium Audit - Reserve Reviews For Employers

Workers' Compensation
Premium Refunds Possible

May 26, 2009

Why Is The Total Incurred Amount So Important?

This is one of the more confusing areas of Workers Compensation.  The terms are different on almost every insurance carrier's loss runs.   The term Total Incurred is the sum of the funds Spent added to the Reserves.   In other words:  Total Incurred = Spent + Reserves. The easiest way to locate the Total Incurred is to find the largest of the reserving amounts on each claim. The Total Incurred will always be the largest number. 

The reason that the Total Incurred figure is so important is that is the amount used by insurance carriers to report your insurance loss history to NCCI or your State Rating Bureau.  The amount Spent is not what is used to calculate your E-Mod. It is the Total Incurred  value.   

For instance, if you have a Workers Comp claim that has only $300 spent but there are $13,000 in reserves, then the claim is valued at $13,300 not $300.  We just received a call today from a company in California that had this very question.  The Workers Comp file was left open for three years and they paid premiums off the $13,300 not the $300.  A few claims such as this can wreck a Workers Comp program.

This is a very important point when you look over your company's Workers Comp loss runs.  It is a great idea to make sure the claims adjuster has provided you with an updated status on the Work Comp claim.  Workers Comp adjusters are very overloaded with claims, especially with the downsizing occurring due to the recession.   They may not have time to look at reducing reserves. That is the lowest priority in an adjuster's busy day.  The adjuster has about thirteen main tasks and reducing reserves is #13.  It is not the individual adjuster's fault.  It is the way Workers Comp claims systems have been operating for many years. 

If you feel that your files are over-reserved, it may be time to call in a claims professional or a Workers Comp consultant to keep your Workers Compensation premiums in check. We always recommend not calling an adjuster and saying that all your Workers Comp reserves are too high. Emailing an adjuster with specific questions is the best way to follow your claims.