7 They understand the concept of loss development.
Exceptional adjusters understand that the
term loss development is associated with
the growth or reduction of the loss cost
of claims over time. Loss development
tracks how well the adjuster reserves files
during a specific period. The goal in reserving is to recognize the ultimate cost
of the claim as early as possible and maintain that financial posture. Loss development shows how early and accurately the
adjuster estimated that liability, and how
the claims cost grew or decreased because
of uncertainty over the claim’s ultimate
value. Adhering to the reserving philosophy stated earlier will help refine the loss
8 They understand the concept of the Incurred But Not
Reported loss (IBNR).
The IBNR is an actuarially forecast loss
amount based on the adjuster’s claim
reserves and loss payments. The IBNR
mathematically indicates there are claims
“out there” that have occurred but have
yet to become known or reported. Also
included in the IBNR is a factor for insufficient claim reserving (under-reserving)
known as the Incurred But Not Enough
Reserved (IBNER). Both show up as liabilities on the insurance company’s
balance sheet or that of the self-insured
program. Exceptional adjusters understand that their accuracy in stating claim
reserves has a paramount effect on the financial success of the insurance company
or self-insured program.
9 They work closely with a loss control specialist and the insured to build a
comprehensive workers’ compensation
risk management program.
Claims management is just another form
of loss control because it seeks to control
the cost (severity) of the loss. Generally,
a loss control specialist seeks to keep the
losses from occurring by controlling the
frequency of loss. The loss control specialist and the claims management specialist should work in concert to identify
the trends in frequency and severity of
the insured’s accidents.
By physically inspecting working conditions and analyzing historical loss information, these specialists should help the
insured identify, prevent and reduce the
cost of their claims. Loss control is the cornerstone of any comprehensive insurance
program. When the risk management
team (loss control and claims) works together, exceptional adjusters understand
that the insured’s workers’ compensation
program is being prudently managed.
10 They measure their performance. The workers’ compensation business, like other forms of insurance, is
numerically driven. Therefore, tracking
performance is relatively easy using spread-sheets and databases. Exceptional adjusters
have a number of measurement tools to
help them monitor their success in managing claims. A plethora of benchmarks is
not indicated, but three or four measuring
tools such as average length of time a claim
is open, average cost per claim, accuracy of
reserving (loss development) and response
time to new claims are indicated.
11 They understand the concept of subrogation and its impact.
In workers’ compensation, the employer/
insurer is the sole entity financially re-
sponsible for the employee’s work-related
loss. Payment is through the workers’
compensation statute and claims process.
However, if a third party other than the
employer or a fellow employee causes the
loss, the insurance company may subro-
gate the loss and sue the negligent (loss
causing) party. Exceptional adjusters are
cognizant of potential third-party re-
coveries in any form (e.g., second-injury
funds, negligent third parties, reinsur-
ance). They look for subrogation possi-
bilities on every claim they handle.
Workers’ compensation adjusting is a
discipline that requires a broad base of
specialized knowledge because the claims
process is sophisticated and complex.
Exceptional adjusters are consistently upgrading their specialized knowledge and
claim skills. Having a working knowledge
of premium development, underwriting,
loss control and actuarial science will
help adjusters understand the importance of what they do and how it affects
the entire insurance process.
Brian Francis ( email@example.com) is a
risk manager and litigation consultant in
FAILURE WAS AN OPTION
T (888) 873-6752 F (888) 436-3092 www.USFORENSIC.com
WATER OR FIRE LOSS?
U.S. Forensic evaluates product performance to
determine if it failed due to a design/manufacturing
defect, improper installation or misuse.
National Account Pricing Available