Watch Your Classifications

Saturday, January 8, 2005 | 0

If you're in business, you must be concerned with the bottom line. You cannot afford to overlook anything, including worker's compensation. There are many businesses, municipalities, etc., that are being overcharged for their premiums due to unintentional insurance errors, and they don't even know it.

Think about this for a second. There are over 500 worker classifications, and over a dozen pairs of hands tinkering with your policy including the insurance company underwriter, underwriter assistant, claims adjustor, claims assistant, insurance company rater, rating bureau personnel, state personnel, clinic doctor, clinic staff, and more. Worker's compensation is very complex and convoluted even for the insurance experts. There is plenty of room for error, and no one is infallible.

MISSCLASSIFICATIONS DO HAPPEN! And they happen often. Take manufacturing plants for example. There are supervisors, secretaries, and cleaning staff. They are on the payroll along with the people actually doing the hands-on labor. Because of this they sometimes get lumped together, creating the appearance that all the employees are presented with the same risk. This is simply one example of how rates are driven up. Statistics show companies that are spending upwards of $30,000 per year on their premium, with 3 or more worker classifications, are being overcharged 75% to 80% of the time. The overages are averaging $10,000 to $30,000, and that goes up, the larger the company and the more classifications they have. If a company is doing business in multiple states the chance of errors is even higher.

There are many warning signs one must be aware of that are indicators your company may be entitled to a refund due to unintentional insurance company errors. Some of them are as follows:

- The insurance company has changed your basic classification
- Your experience modification has been increased during the policy period
- Charges were made for uninsured subcontractors or owner-operators
- Various credits or discounts are missing from your policy
- You did not get a copy of the auditor's worksheets
- You received a large additional or return premium (you may be entitled to more)
- Your state implemented a rate change
- Previously open claims have been denied by official rulings
- Your audit was conducted more than 120 days after expiration
- Your audit was conducted via mail or telephone
- You have had an NCCI or Bureau inspection which resulted in a higher rated classification being added to your policy
- You have never reviewed the Worker's Compensation Basic Manual for new codes
- Credits that were on last year's policy have been removed from your current policy
- Your policy does not use at least 4 classifications
- You are a contractor involved in several types of work
- The audit was conducted on a quarterly basis using the 941's or State Unemployment returns
- Your policy was canceled or rewritten with a different effective date
- Your classification includes the words "all employees".
- You have a minimum premium policy, and have no employees or payroll
- You are an executive officer of the corporation and your wages were assigned to a high rated classification
- You are a contractor involved in a Wrap-up construction project
- Your policy contains an ARAP surcharge
- Your policy was endorsed mid-term to increase your premium

It's true that both your agent and insurance carrier do audits. However, your agent may not have the time or resources to do an in depth review of your policy going back at least 3 years, which is the length of time most states allow. This is not a reflection of their performance. They simply wear other hats. The insurance company, while not in business to make intentional mistakes, is not motivated to find them either. When they do an audit it is not likely to lower your rates. Instead they are looking to see if you're being undercharged. They are also looking to see if your work environment has changed in order to determine if a rate hike is justified. You wouldn't let the IRS do your taxes, so why would you let the insurance company determine your premium?

Your company may even have someone in place that oversees worker's compensation. They may be doing a fine job, but how can you be sure? Remember no one is infallible. So how does a company determine if everything is as it should be? Enter the independent auditor. Independent auditors are companies that will review your policy going back at least three years.

They are not looking to sell you insurance, or replace your agent. They work on a contingency basis. If you do not receive a refund then there is no fee. If you do receive a refund the fee is generally 50%, and comes out of the recovery. And everyone knows that 50% of something is worth a lot more than 100% of nothing!

The audits are performed off-site and are generally very non-invasive. Simply compile your policy information, spending maybe 15 minutes a day until the information is all together. These services are very well received, as there is no risk. It's truly a win-win situation. If there is no refund, there is no fee. That means everything is fine, and you have peace of mind in knowing you're not being overcharged. If errors are found then the company gets a refund, and the present and future rates are lowered once the insurance errors have been corrected. No new money ever has to be allocated for the service as the fee comes out of the recovery.

Worker's compensation is very costly, and cannot be scrutinized enough. Are you absolutely sure you're not being overcharged?

by Joel Lerner of Questar Recovery Group
www.LowerYourPremiumNow.com
(703) 898-0401
Email: info@LowerYourPremiumNow.com

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