Are You On Top Of Your Claim Reserves?
With the winter winding down chances are that you had one or more insurance claims arise. Maybe it was a slip and fall, or a plow truck accidentally hitting a curb or maybe it was one of your employees getting injured on the job. This is why you have insurance. But how are these new claims viewed by your insurance carrier? How will they affect your premium?
When an insurance claim gets processed the carrier will attach a reserve amount to it. A reserve is the amount of money the insurance company estimates the claim will cost. This number could include things like medical bills, lost wages, property damage or others. This is only an estimate and often the claim will close at a lower dollar amount. Typically, the insurance company is going to err on the side of caution. This practice, however, can be detrimental to the insured.
Claim reserves need to be monitored on a regular basis. There is a direct relation between reserves and insurance premium. When you renew your insurance policies the carrier is going to view all claim reserves as claims paid. The reason they do this is that they are assuming their estimates are going to be close to the number they will end up paying out. This is why it is extremely important to review all of your open claims and get them closed out as soon as possible for as little as possible. There are things you and your insurance agent can do to help keep claim reserves down and in return help keep insurance premium down.
One important step is to review all of your claims. You should be reviewing every claim when they happen with your agent. After the claim gets processed and a reserve is attached you should be reviewing them again. The claim may have incorrect information which could lead to an inflated reserve dollar amount. In some instances you can speak with the adjuster and they will lower the reserve if you can present a valid reason. This is important, especially leading up to your insurance renewal. As mentioned, the insurance carrier will view claim reserves as claims paid so it is crucial to have accurate reserves so you are not being over charged by the insurance company. Monitoring these claim reserves should be an ongoing procedure. Some insurance claims are processed and paid quickly. Some claims that involve bodily injury such as slip and falls can last for years. This is the reason why it is critical to update the insurance carriers with any new information that may allow them to lower the reserve amount.
Settling an insurance claim can sometimes be the best option and can prevent your insurance premiums from spiking. We have all seen the rapid rise of slip and fall claims in the US. Whether they are legitimate or not they all tend to be expensive. When an insurance carrier sees a slip and fall they typically attach high reserves to those claims. The unknown cost of high medical bills is usually a big factor. In some instances it can be cheaper to settle a claim for tens of thousands of dollars rather than have a claim reserve of hundreds of thousands of dollars on your loss history. You should discuss your options with your agent and your insurance carrier.
One thing you should be receiving proactively each year are loss runs. Loss runs show all of your claims history for a determined amount of time. This is valuable information and should not be carelessly discarded without reviewing. Everyone wants to save money on insurance. Reducing and closing claims are ways you can accomplish that.
For more information about business insurance, I am always available to schedule an appointment to take a look at your existing coverage. You can reach me in the office by calling 508-824-8666 and asking for Jared Perkoski.