Reviewing insurance agency websites is one of my more severe forms of punishment. If you've seen one, you've seen too many. Without exception, they all tell the same story: the agency staff is professional, the service is excellent, they offer continuing education, and they take pride in their advanced technology. Different pictures for the most part, but that's about all.
Oh, yes. You can save money by calling for a quote.
With all of the well trained and highly qualified professional people at insurance agencies, why do most of them totally ignore the most important day of the year for workers' compensation?
Here's a hint: it's not the renewal date. No one can forget that day or they wouldn't get paid.
It's the valuation date (also known as the unit stat date). This date occurs six months after policy inception, and is the moment when the insurance company sends loss information to the rating bureau to use in the promulgation of the experience modification factor, or the Mod.
This information includes not only the money that the insurance company has spent on the claim, but also its expected costs or reserves. It's critical that you be certain these numbers are correct before they are sent to the bureau. With few exceptions, once the bureau has the numbers, they are set in stone.
The most important numbers to watch are reserves. Adjusters have the difficult job of looking into a crystal ball to determine the final cost of an employee's injury. It's rare that the crystal ball gives them a clear picture, which often leads to reserves being higher than necessary.
When reserves are too high, your clients will be overcharged. In other words, they will pay too much.
This doesn't mean that all reserves are too high, but you must communicate with adjusters about what is happening with the claim. Talk to the adjuster about what information is needed and how you can assist them.
Your mission should be to help the adjuster get the information they need to do their jobs effectively and efficiently. It's not a good strategy to confront the adjuster about reserves. Such words as "That reserve is too high!" rarely produce positive outcomes.
Yet a cooperative approach can lead to reduced reserves. For example, too often reserves can't be lowered because of a lack of communication with the treating physician. Adjusters don't have the time to hound a doctor about calling back. The best move is to make this your responsibility. Take it upon yourself to get the information from the doctor, even if you have to schedule an appointment yourself. Your clients have thousands of dollars at stake.
In order to be effective at making sure reserves are set correctly, you must start at least 90 days prior to the unit stat date. Get the loss runs for your client and discuss the open claims with the adjuster. This process can take some time, so it's critical that you start early.
The Mod does more to control an employer's workers' compensation costs than any other single component of the entire workers' compensation process.
Ignoring the unit stat date will ensure that your client's Mod is higher than it should be, which means that no matter how great your markets or how well you can craft submissions, your client will pay more than is necessary.
Leverage your professionalism and knowledge by concentrating on the most important day in the workers' compensation year. If you partner with your client and the insurance company to manage the unit stat date, the renewal date will take care of itself.
Next time, we'll talk about how to share the results of this work with your clients to build an alligator-filled moat around your top accounts.
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