For independent schools and cultural institutions, managing workers compensation claims efficiently is crucial. Not only does it ensure the well-being of employees, but it also protects the financial health of the organization. At the Independent Schools Compensation Corporation (ISCC), we pride ourselves on our efficient and comprehensive claims and case management. We understand that a strong claims management program can make the difference between swift resolutions and prolonged, costly disputes.
The Financial and Operational Impact of Aging Claims
Did you know that 12% of claims account for 88% of claim costs?
Aging workers compensation claims can have significant repercussions for an organization. Let’s break down why addressing open claims is essential and how it impacts your organization:
1. Cost-Sensitive Programs
Medium-to-large sized organizations often participate in cost-sensitive workers compensation programs, which are frequently structured as large deductible programs. This setup means that organizations are responsible for covering substantial amounts of losses before insurance kicks in. Aging claims can lead to higher costs due to their extended duration, as each year they accumulate additional expenses and potential liabilities. Proactively managing these claims can mitigate unexpected financial burdens and help maintain budget predictability.
For self-insured workers’ compensation groups like ISCC, the dynamics can be quite different. Since these groups assume full responsibility for their claims from the outset, they must actively manage and control all aspects of their claims handling. Aging claims can particularly strain their financial resources, as they bear the full cost without the cushion of insurance coverage. Effective claims management, including regular reviews and strategic interventions, becomes crucial to prevent escalating costs and ensure financial stability. This proactive approach helps self-insured groups avoid unexpected liabilities and maintain budget predictability over time.
2. Assumption of Losses
In a self-insured workers compensation model, organizations assume the payment of all losses. Beyond the direct costs of claims, there are indirect costs, such as collateral requirements, which serve as a financial guarantee for underwriting carriers. Open and aging claims increase the need for higher collateral to secure potential losses. This can strain organizational resources and limit financial flexibility, making effective claims management even more critical.
3. Collateral Calculations
Collateral requirements are calculated based on actuarial forecasts that consider various factors, including an organization’s loss history, industry development factors, and financial stability. Aging claims can adversely affect these calculations, leading to increased collateral demands. This not only impacts cash flow but also signals a potential lack of effective claims management to underwriters, which could affect future insurance terms and rates.
4. Organizational Impact
Failure to manage open claims effectively can have a lasting impact on an organization. If aging claims are not diligently addressed, they can skew predictions of future losses. This could lead to inflated future loss forecasts and higher costs for the organization. Furthermore, unresolved claims may indicate systemic issues in claims handling or workplace safety, potentially undermining organizational morale and operational efficiency.
Implementing a Strong Claims Management Program
To address these challenges and ensure the effective resolution of claims, consider the following strategies:
Proactive Claims Handling: Address claims early and actively. Timely intervention can prevent claims from becoming long-term issues and reduce overall costs.
Regular Reviews: Conduct frequent reviews of open claims to assess their status, identify potential issues, and implement corrective actions as needed.
Collaboration with Experts: Work closely with claims adjusters, legal professionals, and medical providers to ensure that claims are managed efficiently and effectively.
Enhanced Reporting and Analytics: Utilize advanced reporting tools and analytics to track claim trends, predict potential issues, and make informed decisions.
Training and Education: Equip your team with the knowledge and skills needed to manage claims effectively, including understanding regulatory changes and best practices.
At ISCC, we understand that each organization’s needs are unique. Our commitment to efficient and comprehensive claims management means that we work closely with our members to ensure that claims do not remain open longer than necessary. By implementing a strong claims management program, you can not only mitigate the financial impact of aging claims but also foster a safer and more resilient workplace.
