Excess Reporting and the Bon Jovi Rule

If you know me, you know I love a corny dad joke.

Here's one of my favorites that I use to annoy my friends. If I am en route to a location, and someone calls me to ask how close I am, I advise that I am 1 Bon Jovi away.

One Bon Jovi is a unit of measurement. It means I'm “halfway there.”

Aside from garnering eye rolls, this is also a great lesson in Excess Reporting.

For a while now, I've had a few claims professionals ask me to make a series of videos explaining excess insurance and the importance of reporting. This month, I finally completed the series.  While I'm not going to recap everything from the videos in this blog, I will highlight the main lesson:

When to Report Claims to Excess Carriers: The 50% “Bon Jovi” Rule

In most cases, excess carriers require you to report claims to them when the total incurred reaches 50% of your self-insured retention. I'll break it down for the math averse:

Self-insured retention (SIR): This is just a fancy term for the limit of the self-insured program.  When a business becomes self-insured, they have to decide the maximum amount they're willing to pay for each claim before they hand it off to an excess insurance carrier to handle the rest. This dollar amount is the self-insured retention.

Attachment point: This is where the self-insured retention limit ends, and the excess coverage begins.

Excess coverage: Insurance coverage for amounts greater than the self-insured retention, up to the limit of the excess policy (because remember, ALL insurance policies have limits).

One Bon Jovi: Halfway there (50%)

Example: Company A has a self-insured retention (SIR) of $300,000. Excess coverage has an attachment point at $300,000 with a limit of $2,000,000. The claims adjuster would report the claim when the total incurred reaches one Bon Jovi, which in this case would be $150,000.

Now of course there are other excess reporting triggers aside from the Bon Jovi rule, but reporting at the 50% mark is the most common trigger you will see. If you are a claims adjuster, always check your client service instructions to make sure you understand all of the different excess reporting requirements.

If you would like to see the video series on excess coverage, please visit my profile on LinkedIn, or you can find the videos on TikTok under the handle @riskfluencer.