The Ins & Outs of Going from Guaranteed Cost to a Loss Sensitive WC Program

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Helpful Tips and Tricks:  Moving from Guaranteed Cost to Loss Sensitive Program

At your next Workers' Compensation renewal, your broker may present you with options for a "Guaranteed Cost Program" and a "Loss Sensitive Program." The purpose of this paper is to help you understand your claims exposure for the different types of programs. These tips are intended to help you manage your claims costs on a Loss Sensitive Workers' Compensation Program. Keep in mind, state rules may differ. Your claims advisor can provide additional insight and assistance.

Stipulation Awards

Before choosing a Loss Sensitive Program, make sure you have an understanding as to which prior claims have been closed with a Stipulation Award for "future medical. If you do not have this, request a list from your insurer prior to
expiration to include - at the very least - employee name, date of injury, and body part affected. In some states, the injured worker is allowed future medical for life. As new claims arise, cross reference against the list provided. If you have a match, identify if the condition is an exacerbation of the old injury (further described below) by obtaining the employee's statement. The employee may have been experiencing symptoms soon after the prior claim closed. Once confirmed, contact the prior insurer's assigned claim adjuster and request that the claim be reopened. Provide specific details as to why you believe the current injury is related to the prior injury. Contact your claim professional if you experience a push back from the prior insurer.

Exacerbation vs Aggravation

Simply put, an exacerbation is a flare-up of a pre-existing injury. Make sure your employee understands to immediately advise their supervisor when this occurs. An aggravation is when a pre-existing injury has worsened due to a work related event. If unknown, when sending the employee to the clinic for treatment, make sure you ask the physician to identify whether the injury is an exacerbation or an aggravation. This must be reflected in the work status and/or medical report as a diagnosis that the injury is an exacerbation, which will help prove the prior claim should be reopened. By identifying and understanding these two conditions, you may be able to avoid claim handling charges incurred under a Loss Sensitive policy. If the claim was reported under a Loss Sensitive policy in error, contact your claim professional early on in order to assist in transferring the claim to the Guaranteed Cost policy.


When obtaining the employee's statement, you may find that the injury did not occur on your property or did not arise out of employment. When reporting the injury, make sure you identify exactly what led up to the injury and how it occurred. The insurer's subrogation unit will investigate the loss in order to identify the "at fault" party. For instance, 1) while an employee is driving on behalf of the company, he/she is struck by a 3rd party's vehicle; 2) while on company business, your employee slips and falls off premises.  In these situations the insurer will contact the 3rd party's insurance provider in order to recover funds paid for medical expenses and other costs.


This term is used when you want to reduce the claim exposure to take into consideration any conditions that are "nonindustrial". In some states, apportionment occurs once the employee has completed treatment. Make sure the physician has identified early on if any personal condition(s) of the employee is affecting the work related injury. Once the employee has been discharged from care, the final Permanent Disability rating must take into consideration the personal condition by excluding any monetary compensation relating to the condition. Depending upon the cost of the award, you may want to consider obtaining a "med-legal report" if you believe that the personal condition was not properly identified by the physician. Contact your claim professional to discuss as the costs for a med-legal may not be advantageous when comparing to the Permanent Disability award. In addition, each state has laws surrounding how apportionment can be applied to a claim.

Cumulative Trauma

This condition occurs over time. You may find the medical report refers to the injury as "Repetitive Motion" (note - these terms are used interchangeably). Refer to your claims professional as to how the state applies the rule. This type of injury may have begun while under the Guaranteed Cost policy. It is very important to have the physician identify the exposure period as you can justify opening a claim under the Guaranteed Cost policy. By having multiple claims open for the same injury, you will reduce the exposure on the Loss Sensitive policy. Please note, a med-legal may be needed in order to identify the exposure period. Once the period has been identified, the insurance companies will agree upon an allocation percentage. For instance, the Guaranteed Cost policy year may have 60% of the exposure, which will reduce the Medical and Indemnity cost on the Loss Sensitive policy.


The points noted above are to help our clients have a fundamental understanding as to what steps are necessary in order to reduce their costs on a Loss Sensitive policy. These techniques are applied on a case-by-case basis. No one claim is exactly the same. Having a conversation early in the claim process will help reduce your exposure by identifying what steps need to be taken. We have been successful in minimizing our clients exposure by discussing the details with the insurer and Defense Attorney (if litigated) early on. The following are cost saving examples:

  1. Reduced exposure by 82% on Loss Sensitive policy. Guaranteed Cost policy paid out $70,000, while our client only paid $15,810.
  2. Reduced exposure by 48% on Loss Sensitive policy. Guaranteed Cost policy paid out $39,000, while our client only paid $41,519.
  3. Currently in the process of reducing exposure by 69% on Loss Sensitive policy. We anticipate the Guaranteed Cost policies will pay out $120,750, while our client will only pay $54,250.
  4. Currently in the process of reducing exposure by 100% by not recommending early settlement and pushing the Defense Attorney to conduct a med-legal and deposition, which resulted in identifying the claim as a specific injury occurring during the Guaranteed Cost policy term. Potential cost savings of $60,000+.


MCMRebecca Feldman - Claims Manager

Ms. Feldman has more than sixteen years of insurance experience in providing quality customer service to clients of various industries, with the last 4 years focused on WC claim advocacy. Ms. Feldman joined Equity Risk Partners in 2013.  As a Claims Manager, Ms. Feldman is responsible for advocating WC claim resolutions and facilitating Executive Liability claims on behalf of Equity Risk Partners' clients throughout the US. Her responsibilities include oversight and advocacy of Workers' Compensation claims, loss forecasting assistance, Experience Modification projection, post-claim investigation, and data analytics analysis. Prior to that, she worked as an Account Manager handling Property & Casualty and Executive Liability placements with a focus on Real Estate Investment, Manufacturing, Technology, Financial Institution, Higher Education, and Healthcare type clients. 

Ms. Feldman holds an Associate in Claims and Associate in General Insurance designation.

Contact Information:

 Phone: (415) 874-7145 


RebeccaMichael Marcon - President, HUB International and Founder, Equity Risk Partners

Michael Marcon has more than 30 years of insurance experience, pioneering the delivery of insurance due diligence to private equity firms and specializing in alternative risk financing and transactional insurance products. Before launching Equity Risk Partners, Mr. Marcon was Executive Vice President of Aon Risk Services - Mergers and Acquisitions Group and he was instrumental in creating the Private Equity practice for Aon's predecessor company, Rollins Hudig Hall. He served as Regional Manager - Finance for Transamerica Corporation, as well as positions in Special Risk Financial and Capital Management for CIGNA Corporation. 

Mr. Marcon holds an undergraduate degree in economics from Ursinus College (where he was the former chairman of the board of trustees) and an MBA in finance from Drexel University. Mr. Marcon tweets from @mcm7464 and can also be reached through his blog, Michael Marcon Tweets, where he writes about business, tradition, and life.  

Contact Information:
Phone: (415) 874-7101