DMB Risk Solutions, LLC

Case Study #3:

Risk Management Department of a Regional Department Store

A regional department store implemented a casualty allocation program designed to send costs associated with their workers compensation and general liability program down to the individual store level.  To allocate a fixed charge per incident back to the store, the program used a “Total Incurred” dollar threshold.  For workers compensation incidents that passed this threshold, if an employee returned back to work within a prescribed time frame, the store would get a 50% credit back for their efforts.  Complications arose when the claims ”Total Incurred” went beyond and then back below the specified dollar threshold. In order to determine whether there was a change in the allocation status, claims had to manually checked every month.  If the claim returned to a point below the threshold, the allocation charge was then credited back to the store.  However, if a return to work credit was issued, it was then debited back.

After the allocation was generated, an additional manual entry to a separate spreadsheet was required to log the accounting transaction detail on a monthly basis. This entry was then uploaded into the client’s internal accounting system. This entire process was error prone due to the amount of manual intervention.

Our consultant created an allocation application that imported the claims data directly from the third party administrators on-line claims system.  The allocation model compares the current and previous month’s claims data to determine which record needed to be newly allocated and which may have changed status.  The application then automatically generates a transaction detail report that takes into consideration past return to work credits.  This report was then imported directly into the client’s accounting system.

Through our efforts, a process prone to inaccuracy that took 1 ½ to 2 days per month was converted to a procedure that took literally minutes and was accurate to the penny.