Reduce Your Next NCCI Experience Mod: Reserve Auditing
Updated: Jan 5, 2022
If you are one of the 70% of organizations that renew on 12/31 or 1/1, there is an approaching deadline 6 months from now for which you need to be aware. If you renew at another time, you have the same deadline 6 months from your renewal date.
Six months after you renew comes your Valuation Date when your work comp carrier reports data to NCCI for the promulgation of your next Experience Modification Rating. If you are in a group captive, the fronting company for the captive will do the same. The time to start planning a claims review is right after renewal.
On your Valuation Date all of your claims data, including open claims, will be reported to NCCI. The reserve values on your open claims from your just expired and 2 preceding policies will be set for experience rating, and those values will be used in your next Experience Mod. If development occurs after the Valuation Date in any claims that reduces reserves or if claims close for lower values, you’re stuck with the values submitted on your valuation date.
The only way to proactively manage your upcoming experience modification rating is to conduct a reserve audit on open claims and try to negotiate more favorable reserves on claims whose reserves are suspiciously high.
If you don’t have online claims access (you should request this from your carrier anyway), start by requesting currently valued loss runs. Then, start the conversation with your broker’s Claims Advocate or a 3rd party claims consultancy about reviewing open claims. You’re not going to want to waste time questioning everything, but you can identify claims with reserves you believe are suspiciously high and address your concerns with the adjuster.
If successful negotiating lower reserves, you will decrease your upcoming Experience Mod and directly reduce the cost of your renewal premiums.
Six months before your Valuation Date may seem like a lot of time, but you don’t want to wait and give yourself just 60 or 90 days to accomplish this. Start early.
Stuart Cytron, MBA has been published in trade journals such Construction Forum St. Louis and St. Louis Business Journal among others. You can read more about Stuart and how he developed a passion for helping businesses reduce work comp expenses on his website.