Workers’ Compensation Claims Closure Projects Offer Solutions for Adjusters

Effective Project Management, Teamwork, Analytics, Case Assignment Keys to Achieving Results

Across the entire workers’ compensation industry, many insurance companies and employers are sitting on large-tail claims that have exceeded the ultimate values forecast in prior years. Today, more employers, insurance carriers and claims adjusters are looking for innovative ways to close their paid claims and drive down incurred losses.

For those facing such challenges, carefully orchestrated closure initiatives that address complex and legacy workers’ compensation claims can help make a difference in an insurance company’s loss ratios and ultimately its financial position.

Among adjusters, the rising costs are all too familiar: According to NCCI, the average indemnity cost of a lost-time claim rose by 47 percent during the last decade. Meanwhile, the medical portion of these claims jumped 95 percent, to $27,700 in 2010, from $14,200 in 2000.

Even though determining whether and when to settle a claim involves both science and art, there are several guide posts for structuring closure initiatives that have proven more effective at producing results. Here are some best practices for claims professionals:

Finally, it doesn’t hurt to aim high. Many clients involved in well-run closure initiatives have been impressed with their results. One large self-insurer improved its 12-month closure rate to a 53 percent resolution in legacy claims in some of the most difficult jurisdictions. Of the claims closed, more than half are full and final. That percentage increases to 70 percent in states allowing for full closure outside of a disputed claim.

Similarly, an insurer involved in a closure initiative reduced its case reserves by $10 million in 12 months, achieving a $1.2 million reduction in litigation expenses over the prior year. And it reduced outstanding claims by nearly 60 percent. Indeed, when you work with effective partners, use innovative analytics, and bring it all together with excellent project management you can achieve superior outcomes.

Steve TestanBy Steven C. Testan, founder and senior managing partner, and Misty Price, director of analytics at Adelson, Testan, Brundo, Novell & Jimenez, a national law firm whose primary focus is the defense of workers’ compensation claims.