Why Audit Reserves?
1. The insurance regulatory authorities scrutinize the reserving practices of workers' compensation carriers to help identify and prevent potential insolvency.
2. Reserves are set "conservatively" by the insurance carriers (somewhat higher than file documents support) to get through the insurance department solvency criteria.
3. These "conservative" reserving practices work against the employer. The higher the reserve, the higher the experience modification. The only safeguard for an insurance agent and his customer, is to monitor and audit the reserving practices of the insurance carrier.
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4. The employer has the legalized right, within six months after policy expiration to audit their open workers' compensation claim files and stipulate that reserves reflect the actual file documentation.
5. The result is a change in reserves specifically for unit statistical plan filing purposes, which lowers the experience modification.