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Risk managers strive to teach actuaries about workers comp claims management

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DANA POINT, Calif. — Risk managers can influence the actuarial reports that affect their company's bottom line by educating their actuaries and implementing favorable claims management practices, risk managers said.

Kurt E. Leisure, vice president of risk services/assets protection for The Cheesecake Factory Inc., said his actuarial report, shared with the company's chief financial officer, serves as a grading of his workers comp claims management efforts.

“My actuary report is really my report card,” Mr. Leisure said. “At the end of the day, it's a reflection of all the efforts that I have put in place throughout the year and the outcome.”

The reports grab upper management's attention because they affect a company's bottom line by determining how much will be spent on expenses such as the letters of credit used to back a large employer's workers comp risks, he and other speakers said during the California Workers' Compensation & Risk Conference.

The gathering was held Oct. 1-4 in Dana Point, Calif.

“When I am talking to my CFO, he does not want to know about return-to-work programs and reserving and all of that,” Mr. Leisure told conference attendees.

“He just looks at the actuary numbers. That is what we use to post our letters of credit. That is the bottom line for him,” Mr. Leisure said.

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Actuarial reports reflect the entire year's efforts to prevent claims and manage them post-accident, said Michael W. Simmons, director of risk management for the Riverside Community College District in Riverside, Calif.

“This is what we work for the other 364 days a year ... to ultimately show the results and demonstrate the results to our chief executive officers,” and others in upper management, Mr. Simmons said.

The panelists discussed several claims management efforts that they say ultimately shape their actuarial reports.

With 35,000 employees working around knives and flames — which drives claims frequency but not severity — The Cheesecake Factory found the adoption of a telephone nurse triage program helpful, Mr. Leisure said.

Employees like the program because they receive immediate attention from the telephone nurses and it relieves restaurant managers from helping determine whether an employee should see a doctor for a minor injury that can be treated with first aid.

Of the injuries employees call in to the nurses, 40% never become a workers comp claim, Mr. Leisure said. “Why is that important? Because the actuaries look for frequency,” he said.

Mr. Simmons told of his past experience as risk manager for a fast-food company where he hired general liability defense attorneys rather than lawyers experienced in defending claims in California's workers comp system.

General liability attorneys practice in the civil arena, so they are not discouraged by “years and years of being battered in the work comp system,” Mr. Simmons said. “They don't know they can't win.”

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To build trust and respect for his department and to educate company managers on where the money spent managing workers comp claims flows, Andrew S. Flor, director of risk management for Montage Hotels & Resorts in Laguna Beach, Calif., encourages key corporate personnel, such as the CFO and human resources staff, to attend claims review meetings.

“What better place for people within the organization to see you in action — to demonstrate your abilities, your knowledge, your expertise — than in the file review,” Mr. Flor said. “Just invite them once. Trust me, they are not going to want to go again.”

Similarly, Mr. Flor advises inviting actuaries to attend file reviews as part of an overall effort to educate them on the company's claim-closure efforts.

“They are not claims people,” Mr. Flor said. “Make them into claims people.”

Educating actuaries on any new claims-management program improvements can encourage the actuaries to lower the expense estimates contained in their analysis, said Dustin Gary, an actuary at Overland Park, Kan.-based Centric Actuarial Solutions L.L.C.

“Talk (to them) about the big claims and why they are outliers and it will never happen again,” Mr. Leisure said. “Those shouldn't throw off your whole program. But if you apply the actuarial numbers to them and the development factors, it typically does.”