Changing Your Workers Compensation Insurance Company? – Be prepared for a reinterpretation of the Rules

It’s true! There really are rules written about workers compensation! I know sometimes it doesn’t seem like that but they really do exist. So how can one insurance company interpret a rule one way and another company look at the same situation and come up with an opposite interpretation? It happens and when it does can lead to many thousands of dollars in additional premium charges levied against an employer.

Rules governing workers compensation premium issues are written by what’s commonly known as the advisory organization or rating organization for each specific state. Not all, but most states ( about 35) follow rules developed by the National Council on Compensation Insurance, NCCI, and subsequently approved and adopted for use by the individual states legislature in question. Some states have developed their own rating organization which in turn produces rules for their state.

Levels of interpretation run deep. Think about it. On one hand you have the advisory organization or rating organization who develops, writes and publishes the rules. The rules are then adopted by a state legislature, sometimes exactly as written and other times with slight modifications. Then you have a variety of folks out there who have to use and apply the rules on a daily basis. Here’s a short list:

  • Insurance Agents
  • Insurance Company Underwriters
  • Insurance Company Underwriting Departments
  • Insurance Company Department Supervisors
  • Workers Compensation Auditors
  • Audit Supervisors
  • Employers
  • Attorneys
  • Individual State Departments of Insurance
  • Other State Governing Authorities

There’s probably more but I’m pretty sure you’re starting to get the idea that everyone who has to use a rule, will have their own idea of what and how that rule may apply! Doesn’t make it right. But that’s what happens.

Maybe it’s the way they’re written or maybe it’s because workers compensation rules are complicated. Probably both. So let’s get back to our topic…

We are often contacted by a client who has been with the same insurance carrier for many years, been through many audits and has had a stable relationship during that process with both their insurance auditor and company. Who a few years ago changed insurance carriers and recently had an audit that produced a large additional premium. They will tell us there’s been no change in their operation. After a detailed review of their situation most times it’s discovered that a rule previously applied in one manner was reinterpreted by the new auditor or insurance carrier and applied differently.

Here’s where it gets tough. Sometimes an insurance carrier will make a mistake as to how something should work, a mistake in favor of  and almost always unknown to the employer. The employer may go for years unknowingly enjoying the benefit of a misinterpreted rule and then when they move to the new insurance carrier have that rule correctly applied costing them many thousands of additional dollars in premium. Oh, by the way, it works both ways!

So what’s the take away? May be self serving here but why not have your workers compensation program reviewed by an independent workers compensation consulting firm? These types of mistakes are often difficult to uncover on your own before an audit’s completed and you find yourself staring at a large additional premium bill. 

Ok…sorry about that! But I hope you get the idea that when dealing with workers compensation premium issues and audits many things can go wrong, even when you think everything’s right! Welcome to our world!