Claims and reserve management

Reserves are the insurer’s estimate of what a claim will ultimately cost, and that estimate — not the amount finally paid — is what enters your experience modification. Managing claims means intervening while reserves can still be corrected, which is before the rating bureau’s valuation date.

An open claim is a number someone chose. Adjusters set reserves early, on incomplete information, and they are professionally rewarded for setting them high enough. Nobody is rewarded for revisiting one that has become stale, so a claim whose medical picture improved six months ago can still be carried at its original estimate indefinitely.

That number is what the rating bureau reads. Not the settlement, not the final payment — the reserve as it stands on the valuation date. An employer who settles a claim cheaply after that date gets the cash benefit and none of the mod benefit, which is the most common and most expensive misunderstanding in this business.

Intervention is unglamorous and works: a standing review of every open file, medical documentation pushed to the adjuster rather than waited on, disputed compensability raised early rather than at settlement, and a calendar built backward from the valuation date instead of forward from the injury.

Frequency deserves separate attention. Because most mod formulas weight the number of claims above the size of any one of them, a cluster of small medical-only claims can do more damage than a single serious injury. Reporting discipline and a functioning first-aid protocol are mod strategy, not safety theater.

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