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Moore: Top 10 Workers' Comp Policy Questions

By James Moore

Thursday, August 29, 2019 | 281 | 0 | min read

The number of workers' comp policy questions we receive by email, contact form and phone increase exponentially from July through September of each year. I decided to answer some of the questions received over the last three years. 

James Moore

James Moore

Is reading my workers' comp policy worth the time? 

Yes. If you look at the policy as a contract between you and the insurance company, the perspective might change a little. The review will be worth your time. When companies continually review their workers' comp information, we usually note a drop in their premiums, or what their premiums would have been without the policy review process. 

When should we start the policy review process? 

Pull up your policy now on your computer, phone, tablet, or print it out for the old-school review. Read it using the very powerful policy review tool. Great, now read the policy back to front. Yes, read it backwards. Why? Because many readers with workers' comp policy questions stop in the middle.  

Can I just let my agent review the policy for me? 

Do not leave the policy review solely to your agent. Most of the agencies we assist love the fact that their client insureds involve themselves with the policy process. I have never heard an agent not want a client to become more involved in a policy procurement process. Ninety-nine percent of the agents want your feedback. As mentioned in the previous heading, insureds usually see a premium reduction just by becoming more involved in the policy process. 

Is the declarations page really all I need to review?

The dec page represents the “meat” of the policy. Let us call it the main part of the policy. Reading only the dec page compares to test-driving a car without lifting the hood. Your company needs to review the policy beyond just the dec page. If you have only a limited amount of time, then review the dec page first.   

Are policy change notifications considered part of the policy review? 

Most definitely. The last section of the policy is referred to as endorsements. Endorsements to the policy change the original policy. Endorsements may also change the prior endorsements. We recommend an old-school review of any endorsements. Endorsements remain just as important as the dec page. Print them out. Review them very closely. 

Most endorsements cover minor changes. Some can be major. For example, if your company’s operations move into a new state, the policy may be endorsed to include coverage for that state.

A policy can be endorsed an unlimited number of times.   

You mentioned policy parts. What are they?  

Think of the acronym DICEE. I learned the parts of any policy many years ago using this acronym. Your auto, home, etc. policies all have these same parts:   

  • Declarations, including definitions.
  • Inclusions, also called insuring agreements.
  • Conditions.
  • Exclusions.
  • Endorsements.   

Click here for some great reading on the parts of a policy. Some policies also contain policy forms, riders and jackets.   

What if I do not have the time to read a long, boring policy?

Can you delegate it to a coworker or assistant? One of the best ways to have someone to review your policies — not just for workers' comp questions — is by hiring a college intern. Do not ask him to work for free. Give him a little training before starting. Let him use this blog as a reference tool.  

We have incorporated many ideas that originated with a college intern asking questions and adding value, such as incredible spreadsheets for analysis and other great contributions.  

The “outside looking in” vantage point of a college intern makes a company rethink some of its operations.  

We want to switch carriers in the middle of our policy term. Can we switch? 

Yes, but almost all carriers charge what is called a short rate penalty for changing to another carrier mid-policy. The penalty can be very substantial until near the end of your policy period. The short rate penalty the new policy premium totals a large chunk of the budget. You may also alienate your agent from your business operations.   

We do not want to discourage your company from making business decisions such as moving a policy other than the financial considerations. 

How do premium audits fit into a policy review? 

An employer should think of a premium audit as the final closing process of the policy.  Premium audit results and bills should be thought of as the most important endorsement to your policy. Premium audits should be reviewed line-by-line with the premium auditor’s work papers as a guide. We have provided a large number of articles on premium audits for your review.  

We just received our rating bureau worksheets. What do we do with them? 

The rating bureau worksheets should be viewed as another policy endorsement of sorts. Your experience modification factor represents your risk factor. The X-mod can cause your company to pay a large amount of additional premium. Reviewing the worksheets can be a confusing task.   

Bonus question: What is the first step to a policy review? 

Just getting involved with the workers' comp policy process can be a good first step. Health insurance seemed to be the most important budget item. Now, employers have become more inquisitive on this large piece of their budget. We now receive many more workers' comp policy questions than even 18 months ago.   

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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