There Is No Such Thing As a Small Workers Comp Claim

Please see the last two days of postings. It may be best to read them before this post. This mini-analysis is similar to yesterday's post.

We often hear when reviewing a loss run that a claim or a group of claims are only small claims. However, due to the structure of how a Workers Comp E-Mod is calculated, there is no such thing as a small claim.

The way that E-Mods are calculated is that the first $5000 is the primary loss. After $5,000, there is a discount factor that reduces the amount that the Workers Comp E-Mod and premiums are affected.

Looking at a claim for say $5,000 - the employer is charged the full amount against their E-Mod. Remember that is the full Primary Loss. How much of an amount above $5,000 equates to the first $5,000? If you look at the last posting, there is a discount of 80%. So, an insured would pay the same for the next $20,000 of Excess Loss as they did for the first $5,000.

Think of it this way - for a $25,000 claim - the first $5,000 is as expensive as the next $20,000.

The bottom line is that there is no such thing as a small claim. In the example above, the Primary Loss portion of the claim is 400% more costly than the Excess Loss after $5,000.

Next Up - How Do the Last Three Posts Relate to a Workers Comp Claims Loss Run?