Timely Insurance Claims Reporting
From the November 2010 issue of TCI Magazine

By Bob Rush

In football, there is a saying, “It all starts up front.” The same can be said for an insurance claim.

Timely reporting of claims is a major key to controlling costs associated with your claims, which ultimately impacts the cost of insurance to your business. Whether workers compensation, auto, general liability or property, the timeframe in which a claim is reported directly impacts the overall cost of the claim.

Workers Compensation Claims

Consider the following statistics.

• Studies have shown that claims reported within five days of the injury cost more than 100 percent less than claims reported 21-30 days after the injury.
• A report developed for the National Council on Compensation Insurance (NCCI) shows that injuries reported within two weeks are 18 percent more expensive than those reported within one week. Injuries reported between the fourth and fifth week following an injury are 45 percent more expensive than those reported in one week.
• Back injuries are 35 percent more expensive if not reported within the first week.
• Twenty-two percent of injuries reported within 10 days are litigated; 47 percent are litigated when the reports arrive more than 31 days following the injury.

In order for your insurance carrier to effectively manage your claims and control your costs, they need to have claims reported to them as soon as they are reported to you.

Auto, General Liability & Property Claims

Many business owners may not fully understand how timely reporting of these claims can impact their coverage and costs.

For instance, insurance policy language typically requires claims be reported as soon as practical for any “occurrence” or an offense that may result in a claim. If the insurer can demonstrate its defense was prejudiced by lack of opportunity to investigate and settle a claim as a result of the failure to timely report a claim, the insurer may be able to deny coverage for that claim. In this case, you the policyholder, will be responsible for paying the claim on your own.

In addition, failure to report claims on a timely basis can impact the ability of the insurance carrier to investigate the claim and build a proper defense for the policyholder.

For example, late reporting could prevent the carrier from conducting an investigation of the accident scene before the scene changes. In one instance, a slip and fall claim defense was compromised due to late reporting as the parking lot in question was resurfaced between the time of the alleged incident and the time the claim was reported. The carrier was not able to refute the claimant’s contention regarding the condition of the parking lot as the scene had substantially changed. The result was a substantially larger settlement.

One study by St. Paul Insurance Company showed a 78 percent cost increase for late reported bodily injury claims. Why?

• A quick response will allow the carrier to provide injured parties with appropriate attention and instruction to mitigate the financial cost and emotional stress associated with an event.
• A quick response may keep injured party from becoming angry and frustrated and thereby going to an attorney, which can significantly increase the cost of a claim.
• If litigation does occur, failure to respond to the litigation in a timely fashion can result in a default judgment against the policyholder.

These are just a few examples of the consequences associated with a failure to report an insurance claim in a timely manner. As you can see, the sooner a carrier is notified, so they can take action, the lower your costs associated with the claim. Managing the costs associated with your claims can have a direct effect on your insurance premiums and therefore on your bottom line.

Robert Rush is an assistant vice president of claims with Avizent Alternative Risk in Pataskala, Ohio.