Almost any employer might ask, “What’s a Loss Run Report? Why do I need it? Where do I get one?” While it may not sound very exciting, it documents information about your company’s Workers’ Compensation claims––and that includes where your money is going.
Loss run reports come from your insurance company or Third Party Administrator (TPA). While some reports are more thorough than others, there is always useful information on job-related accidents and claims.
Just as a balance sheet helps business owners understand their the financial strength and capabilities of their company, a good loss run report can guide a Workers’ Compensation program in developing risk management plans, tracking the results of current risk management efforts, identifying problem areas and projecting costs.
Yet, because insurance providers send mountains of paper or the loss run reports lack understandable content, many business owners and managers ignore them, failing to recognize the value they offer as a management tool.
Surprisingly, the content of loss run reports varies dramatically. A very basic loss run report (see fig. 1) offers minimal information (the name of the injured employee, the total cost incurred and a comments column) for employers who want to evaluate and improve their injury management process. They will know very little beyond the number of claims and their total cost.
On the other hand, other loss run reports (see fig. 2) include a wealth of valuable and meaningful data.
The second report has more value for several reasons. First, there are four dates: Date of Injury, Report to Employer, Carrier Notified and Carrier Entry. The timeliness of reporting injuries is a key metric in managing Workers’ Compensation costs. The claims costs are much more likely to be lower the faster a business reports a Workers’ Compensation injury. A Hartford Insurance Company study showed that even a week’s delay can increase claim costs by 10% and that claims filed a month or more after an injury cost an average of 48% more to settle than those reported the first week.
Furthermore, the study supports conventional wisdom – the longer the reporting period, the higher the probability of litigation leading to higher costs. A National Council on Compensation Insurance (NCCI) study found that litigated claims cost 40% more than non-litigated claims.
Seriously delayed reporting (more than 10 days to report the majority of claims) and a high litigation rate are a recipe for higher costs. Insurance carriers view these as serious red flags, creating a high risk that could lead to higher costs. The desired goal is to report all injuries within 24-hours of when they occur.
By analyzing a loss run’s date information, employers can determine if their current injury reporting process (lag time) is effective or could use fine-tuning. If so, this can become the basis for formulating actions to reduce the lag time. Future loss run reports can then be used to monitor progress.
A good loss run report also includes information as to whether or not a claim is litigated. Ideally, a 5% litigation rate is very good (10-15% is good and anything over 20% should be considered a red flag). Nevertheless, a number of legitimate factors can result in higher rates. A good benchmark for comparison can be determined by looking at the statistics available from your State’s Workers’ Compensation Division.
High litigation rates can signal all is not well on the employer’s home front. Rates in excess of your state’s average could indicate a need for more and better communication between the injured employee and the employer, a general mistrust of the employer, a fear of losing one’s job, mistrust or lack of confidence in the medical treatment being rendered, or general employee job dissatisfaction. Overall, it simply indicates a need to ask more questions, to look at your current process and try to identify the source of the mistrust or dissatisfaction.