For risk professionals overseeing workers’ compensation and liability programs, claims leakage is a silent profit-drainer. It doesn’t always show up on spreadsheets as a line item—but its cumulative effect can be significant. A few dollars here, a missed opportunity there, and before long, your loss ratios, reserves, and budgets are taking hits you can’t easily explain.

Understanding and addressing claims leakage is essential for any organization that wants to control costs and improve claims outcomes. This article breaks down what claims leakage is, where it happens most often, and what you as a risk manager can do to stop it.

What Is Claims Leakage?

Claims leakage refers to any payments on a claim that are unnecessary, excessive, or caused by avoidable errors. It could be as simple as overpaying a medical bill due to incorrect coding, or as complex as missing a subrogation opportunity that should have offset the claim’s total cost.

Leakage is not always the result of negligence. It’s often a product of inefficient processes, lack of oversight, or failure to use available data. But regardless of the cause, leakage represents money your organization didn’t need to spend.

Where Leakage Occurs Most Often

While every program is different, there are some common areas where leakage tends to happen:

  • Improper reserving: Inaccurate reserves can distort your financial picture and delay important decision-making.
  • Missed subrogation opportunities: When third parties are responsible for a loss, organizations often fail to pursue reimbursement in a timely or effective way.
  • Delayed return-to-work efforts: The longer an employee stays out, the higher the cost. Delays in initiating modified duty programs or engaging in dialogue with employees and providers can significantly increase claim duration.
  • Unnecessary medical treatment or overutilization: Without medical oversight, claims can include services that aren’t medically necessary or compliant with treatment guidelines.
  • Vendor overcharges or lack of contract enforcement: Inconsistent billing and lack of invoice audits can lead to inflated costs that go unnoticed.

How Risk Managers Can Spot Red Flags

While you may not be adjusting claims directly, your oversight is key to identifying patterns and opportunities for improvement. Here are a few warning signs to watch for:

  • Claims with extended durations and escalating reserves
  • Multiple adjuster changes on a claim
  • Minimal documentation on return-to-work efforts
  • Unusual spikes in certain vendors’ charges or medical treatment frequency
  • Declining subrogration recoveries year over year

Conducting regular audits, benchmarking your program against industry standards, and maintaining an open dialogue with your TPA can uncover and reduce leakage over time.

The Role of Your TPA in Preventing Leakage

A strong TPA should be your partner in preventing claims leakage—not just reacting to it. At Athens Administrators, our team takes a proactive approach to managing claims with an emphasis on early intervention, appropriate reserving, and continuous oversight. We combine data analytics with personalized service, so our clients benefit from both big-picture insight and day-to-day accuracy.

Our claims professionals are trained to identify red flags early, pursue subrogation aggressively, and maintain close contact with injured employees and providers to ensure the right care at the right time. And our performance is backed by measurable results—including audit scores, closure rates, and cost savings.

Checklist: Is Your Claims Program Protected from Leakage?

  • Do you review reserve accuracy at key points in the claim’s lifecycle?
  • Are subrogation opportunities tracked and followed up on?
  • Is there a documented return-to-work strategy for each claim?
  • Do you receive regular analytics showing claim duration and cost trends?
  • Has your TPA demonstrated a measurable impact on total claim cost?

If you answered “no” or “not sure” to any of these questions, there’s likely room for improvement—and potential cost savings.

Risk managers play a pivotal role in safeguarding an organization’s financial health. Reducing claims leakage isn’t just about plugging holes—it’s about creating a culture of accountability, transparency, and proactive claims management.

Athens Administrators is here to help you do just that. We work closely with risk professionals to identify gaps, streamline processes, and deliver results you can see in your data—and your budget.

Let’s connect to explore how we can improve your claims outcomes and reduce unnecessary costs.