: : Louis Santelli, CPCU, CIC
Managing Director
Is Your Business Being Overcharged For Workers’ Compensation Insurance?
No business can afford to pay more than necessary for Workers’ Compensation Insurance. Yet 50% of all companies are doing just that. There is more to Workers’ Compensation than an agent simply providing an insurance policy. We find over 50% of employers are being overcharged and do not realize it or know why. Our results-oriented Comprehensive Workers’ Compensation Program is targeted to improve your bottom line.
Overcharges are rampant in the Workers’ Compensation system. It is easy to see why when you consider all of “the moving parts” – everything from premium audit errors, clerical errors, misclassifications, violations of mergers and acquisition rules to poor or no injury management programs and open claims. In addition there is the complexity of the process involving a host of players, from insurance company auditors, underwriters, claims adjusters, brokers and medical providers to state personnel. All-in-all there is a good chance that you are being overcharged without even knowing it.
The first area to be reviewed would be the dreaded premium audit. There are over 800 classifications in the New York manual. Has anyone, ever, gone over the codes that relate to your industry and found the code that best fits your organization. Or, do they rely on the insurance company to “properly” classify your business. Do you know if you have been given credit for the standard exception employees? Have you received credit for all items that are considered excluded from remuneration? Have you received all credits and discounts that you are entitled to? Has your agent or broker helped you prepare an audit package and have they helped train a member of your staff that is responsible for the audit? Lastly, are you aware that you are entitled to a “Three Year Look Back” on all audits? If you have been overcharged, you are entitled to recover those “overpaid” premiums.
There are two parts to the experience modification review:
First, most employers assume their modification is correct, yet many times it is wrong; Second, the formula for the modification is so complex, few employers understand its impact on their premium costs. A single Workers’ Comp claim raises a mod for three years. It can drive up employers’ Workers’ Comp premiums to levels where they are not just paying 100% of claims costs, but 200% to 300% of claims costs! Insurance companies do not pay for employee injuries – employers do! Driving your mod down to its minimum is the most profitable way to slash your Workers’ Comp Costs. So, do you know what your minimum mod is? Figure a mod of 1.00 is a “C” on your mod Report Card, average. Above a 1.00 is a “D” or an “F.” Are you willing to settle for any of those? Why are experience mods wrong? Rating bureaus use incorrect payrolls, or payrolls assigned to class codes with different expected losses. Costs for employee injuries are entered more than once. Claims that should have been subrogated were not pointed out to the State Agency. Credits are not applied properly. Other incorrect data is entered, such as insurance company expenses that should not be charged against your record. Lastly, claims that should have been closed or denied by the adjuster have not been handled correctly. Remember it costs you $3 in future premiums for every $1 the insurance company pays out.
Finally, an injury management program is essential. Insurance companies do not pay for employee injuries, employers do! Workers Compensation is merely a financing mechanism so employers can spread the costs of employee injuries over a three to four year period. While creating and maintaining a safe work environment is essential to reducing injuries, it is simply not enough. An effective plan begins even before an employee is hired. We can evaluate hiring practices and employee relationships, injury reporting procedures, supervisor training, claims management, modified duty and return to work procedures, wellness initiatives and medical relationships as well as workplace safety. Our process can reduce lost workdays, promote employee morale and retention, increase productivity and improve profitability.
If you are already taking care of all of the above, congratulations, you and your broker are doing a fabulous job protecting your employees and your bottom line. If you are not currently handling the above issues, we urge you to call us and let us help you protect your people and your profits.
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