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WorkNEWS October 2012 – Self Insured Leakage Costs

16 Ways Leakage is Costing the Self Insured

Published By ReduceYourWorkersComp – Author: Rebecca Shafer, JD

The failure by the self insured’s third party administrator (TPA) or in-house staff adjusters to comply with workers’ compensation claim handling Best Practices normally results in higher than necessary claim cost. Just like in any other business, the failure to manage the cost of doing business – known as leakage – places the self-insured employer at a disadvantage in the market place. To recover the excess cost of poor claims handling, the company must raise the amount they charge for their products or services to cover the additional cost.

Leakage in an insurance claim is any payment on the claim that is more than it should be. Leakage is normally defined as the difference between what the claims adjuster spent and the amount he/she should have spent. Leakage has also been defined as the lost opportunity to save money on the claim. In essence, leakage is excess and unnecessary claim costs.
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