Incorrect reserve adequacy assessments can lead to false or incomplete findings, uninformed management decisions and unfavorable outcomes, not to mention a possible wrongful termination suit by the claims manager.
Why do so many organizations struggle with reserve adequacy assessments? Frequently, those carrying out the review are not assessing the appropriate criteria to fully evaluate reserve adequacy or the root causes of deficiencies. Recommendations often do not align with findings, organizational objectives, goals or means.
Reserve assessments without an appropriate foundation and documentation have little credibility and are of questionable value. It's always better to have a well-reasoned discussion of the facts, issues and coverages afforded, addressing who is responsible for paying the loss and how much should be paid to resolve the claim.
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