AN APPLICATION FOR A FRONT DESK JOB LED TO A CAREER IN WORKER’S COMPENSATION: When Julie was out of college, she applied for a front desk job at an insurance company. The hiring manager told her she should be an adjuster instead. Julie wasn’t sure what it was but took the job. She had over two hundred claims when she first started, but she realized that she was good at it and made a wonderful career out of it. For several years, she managed a team of examiners at a Fortune 500 Insurance Company. She loves adjusting claims, and is currently a Senior Catastrophic Resolution Specialist at Berkley Industrial Comp. Her vast knowledge is extremely valuable to all of her injured workers, coworkers, and customers.

WHAT ARE RESERVES, AND WHY ARE THEY SO IMPORTANT? From a claims perspective, reserves are the amount of money set aside to cover the legal and financial obligations arising out of a claim. Reserving can be complex, and regulatory compliance rules, such as Sarbanes Oxley (SOX), require insurers to account for their liabilities accurately. Insurers are subject to quarterly and annual reporting and audits to ensure that they are reserved accurately. Failure to reserve accurately could prevent an insurer from doing business in certain states.

YOU HAVE TO RESERVE FOR WHAT IS NEEDED NOW AND FOR WHAT MAY BE NEEDED IN THE FUTURE:  The complicated part of reserving is that adjusters need to predict what will happen in the future. If an injured worker is having surgery, it is vital to reserve not only for the surgery but possible future surgeries and other issues that may occur later in the claim. If the injured worker has diabetes, it may delay healing post-surgery, increasing the weeks that an injured worker may be out of work.

UNDER- RESERVING IS DETRIMENTAL TO A COMPANY’S FINANCIAL STABILITY: While adjusters are not fortune tellers, they need to be as accurate as possible so that a company’s actuary can look at the past reserves and adequately assess its future risks. If the reserves are inaccurate, they cannot assist underwriting in estimating premiums for its policies. Adjusters need to remember that under-reserving affects their coworkers, raises, bonuses, and possible advancement within the company. When files are consistently under-reserved, this can result in charging inadequate premiums, which can cause a downgrading in the insurer’s rating. Downgrading an insurer’s rating from AM Best can cause the insurer to lose customers, employees and their reputation, which can result in insolvency.

TO ACCURATELY RESERVE A CLAIM, AN ADJUSTER NEEDS TO OBTAIN THE FOLLOWING KEY PIECES OF INFORMATION:  It is crucial to obtain the injured worker’s age, education, transferrable skills, and comorbid conditions (diabetes, heart disease, high blood pressure, and other pre-existing conditions). Adjusters need to contact the employer and find out if they can bring the injured worker back to work in a light-duty position based on their current restrictions from the doctor. If the employer can return the injured worker to work, can they bring them back short-term or long-term if necessary? The other critical piece of information is the injured worker’s mindset. Having a work injury is extremely stressful for them, so it is important to keep in contact with them and find out how they are doing. The state jurisdiction will also determine the reserves. Due to statutes and fee schedules, there can be huge differences in reserves depending on the state. Knee surgery may cost $15000.00 after the fee schedule in one state, but another state may not have a fee schedule, and the surgery can cost $60000.00. If an injured worker obtains an attorney, this will also impact the reserves due to possible litigation. The earlier they obtain the information, the better.

RECOGNIZE DEVELOPMENT ON A CLAIM: There are times when a change of circumstances will occur, such as an unexpected additional surgery or obtaining an attorney later in the claim. It is important to address the reserves immediately and update them. Unexpected events will happen that will completely change the trajectory of the claim and the reserves, but do not wait until months later because “bad news does not age well.” There can also be positive changes in circumstances, such as a quicker recovery or an anticipated surgery is not needed. It is important to reduce reserves when appropriate, so the customer’s EMOD score will reflect the accurate reserves.

THERE ARE SEVERAL RESOURCES FOR ADJUSTERS TO USE WHEN RESERVING: Medical records are among the greatest resources for reserving. The medical records should have the correct diagnoses, the estimated length of disability, pre-existing conditions, and the treatment plan. If the physician does not provide this information, it must be requested immediately. If they still will not provide it, it is time to consider obtaining a new physician or an Independent Medical Examination ( IME) so the injured worker receives the proper medical treatment. Another great resource for reserving is ODG, which can be found at www.odgbymcg.com , which can provide some great information for reserving. National Vital Statistics can provide information about rated ages and life expectancy at https://www.cdc.gov/nchs/products/life_tables.htm. One of the greatest resources when it comes to reserving is their coworkers. Reach out to your experienced coworkers, managers, or nurse case managers. They have likely seen several types of injuries, and if the injury is unique, they will probably know where to help you find the information.