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Oct 5, 2008

There Is No Such Thing As A Small Claim - Part IV

From the last post, the Workers Comp adjuster closed the claim out after 4 years and spending out $1,000. The file was originally reserved at $10,000. The file was over-reserved by $9,000..

Using the Variable A (Excess Loss Factor) from the 09/30/08 post of .20 , let's look at the real claim dollars with the loss.
  • Recalculated Primary Loss Over-reserved = $20,000
  • Recalculated Excess Loss Over-reserved = $5,000

What does all of this mean? With the way that the Experience Mod calculations are structured by the NCCI or State Rating Bureaus, small claims are costing your company much more than you may realize.

The Workers Comp Experience Rating systems are structured to make sure that one huge claim will not ruin your E-mod. The flip side is that a few small claims can wreck your E-Mod and your Workers Comp insurance program for years to come.

A claim that is under $5,000 is not a small claim. As you can see $4,000 of a Primary Loss is much more expensive than it looks.

The bottom line is to not just zero in on the big claims. All claims that are reserved as a Lost Time file should be tracked closely.