Ventiv Technology

The Essential Guide to Claims Technology in a Changing Environment 20 C H A P T E R 7 : F I N A N C I A L S RESERVING PRACTICES Why Claim Organizations Need to Get Case Reserving Right Getting case reserves right is an essential function for any claim organization. Reserves are financial assets, set aside as legal obligations to pay for future claims. Setting accurate case reserves is essential for predicting financial exposure in the long-term and ensuring funds are available for claims when needed. Claim organizations rely heavily on case reserves for many different reasons beyond actual claim valuations and legal obligations. Case reserves can be used to accurately assess premiums payable, act as an early-warning system for larger individual claims, manage an organization's cash flow, and assist in future budgeting processes. Case reserves can also impact clients as well. Putting too much money aside, or overstating case reserves, can affect the experience modifier, and ultimately result in higher premiums, distort a client's "loss history," and make it inherently more difficult to move to another provider in the future. Therefore, it's essential that adjusters establish an accurate initial reserve, and continue to maintain and keep all information up to date. Current Technology to Meet Your Needs Ventiv Claims is an easy-to-use claim administration system that incorporates data, systems, and people to promote best practices. From getting reserving right to streamlining payments, Ventiv Claims improves efficiency, reduces costs and adapts to meet the needs of your business today and in the future. Why Determining Case Reserves is Challenging Maintaining case reserves involves a significant expenditure of company resources. Adjusters need strong analysis skills, high-level estimating skills, and a certain degree of intuition. As such, the quality of case reserving practices varies significantly across the industry. Estimating claim costs can be extremely challenging for adjusters. Each state has different legislation, local statutes, and ever-changing regulations when it comes to workers compensation. Also, information that is needed to establish an initial reserve accurately is not normally available to the adjuster at the time of receiving the claim. It may be weeks or even months before the information is released that allows adjusters to confirm the final claim costs. So, how can claim adjusters accurately set reserves with limited information? There is no single best procedure to do this, and many claim organizations utilize different approaches, depending on the nature of the claim. One method is to look at historical data based on similar claims to estimate a reserve. The adjuster uses past information to provide their best estimate. The second approach is based on statistical data. Adjusters categorize all claims with a blanket reserve based on the historical average of an organization's total claims. However, many claim organizations do not strictly enforce their approach resulting in a mismatched combination. While establishing reserves is inherently tricky, accurate data is essential in both approaches. The adjuster must also revisit and update the reserve as new information becomes available, to provide organizations with a clear picture of loss reserves.

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