Most employers don’t have a clear understanding of what Workers’ Compensation reserves refers to. Reserves are funds allocated by your insurance carrier or claims administrator to pay your claims. For instance, if your employee gets injured, an adjuster, in addition to managing the medical care, must estimate the total cost to pay the claim from initial treatment through settlement.

If the injury impairs an employee’s future capacity to work, adjusters must also estimate the amount to pay for this impairment early in the life of the claim, as well as the cost of investigating, defending and managing the injury. If vocational rehabilitation is required in your state, your adjuster must assess these costs, as well.

The Workers Comp Reserve system includes: medical costs, which pay for doctor visits, prescriptions, and physical therapy; wage replacement costs, which replace wages temporarily, or permanently in cases of partial or total disability; and loss adjustment expenses, which assist in evaluating and defending claims. Vocational rehabilitation, may be included, depending on the jurisdiction of the injury.

Because reserves established on your company’s claims greatly impact your experience modification factor, they should be closely monitored. Review loss runs at least quarterly to watch reserve development. As the client, you should monitor and question the progress of claims.

Contact Brazelton Insurance Group to ask questions or inquire more information.