We've shared in prior posts some of the challenges faced by Staffing Companies and PEOs when securing a Large Deductible (LD) policy –  But what about mysterious "expense" allocations?    We are working with a client who is part of a PEOs large deductible workers' comp program.   Total incurred loss value approaches $1M a year.   Curiously the expense portion on their claims is close to 25%.   We're digging in – but could that relate to the carrier enjoying a profit center by way of increased expense fees?   Maybe,   But here's some food for thought:

Breaking Down Workers' Compensation Claim Costs: What's Normal?

When reviewing a workers' compensation loss run, one of the most important things to understand is how the claim dollars are being spent. Claims are generally composed of three cost buckets: medical, indemnity, and expense. But what's a "normal" mix?

Typical Cost Allocation

Here's a standard rule of thumb for how total claim costs usually break down:

What Affects the Mix?

– Medical-only claims often have 90%+ of the cost tied to treatment.
– Lost-time claims skew more toward indemnity and legal expense.
– In highly litigated states like California, expense costs may rise to 20% or more.
– Industry matters too—heavy labor, public entities, and union environments can all shift the mix.

When to Dig Deeper

If expenses are running unusually high (say, over 15%), that could indicate:
– Prolonged litigation
– Inefficient claims handling
– Poor communication between carriers and injured workers

Why It Matters

Understanding these benchmarks helps you:
– Spot red flags in your loss history
– Evaluate your claims administrator's performance
– Identify opportunities to improve safety, return-to-work, or cost containment

Bottom line: Knowing the "normal" percentages gives you a powerful tool to evaluate your workers' comp program—and keep it on track.   As a PEO or Staffing Company utilizing a large deductible – are you reviewing the detailed cost ledgers of each claim payment?   Has your broker dived deeper?

Happy to share more insights and specifics / [email protected]

www.landmarkrms.com