Employers Who Know It All – Consequences for Those Who Intentionally Manipulate The System

Believe it or not there are some people out there who are not very nice! I had the misfortune of running into one of these employers just this past week. Let’s talk.

Our company was contacted by an insurance agent who was working hard to try and secure an employers insurance business. The agent quickly identified that the employer had a glaring error in the classification of their business. Ok, here’s my disclaimer, so I’m not going to name names, describe the location or even the state in which the employer operates. Let’s just say I’m not going to divulge anything about who these people are! I’d like to say it’s to protect the innocent but that’s not the case!

As I mentioned above, the agent had identified a glaring error in the way the employers business was being classified on their current workers compensation policy and had asked our help in identifying the correct classification codes.

We were invited to perform an on site inspection of the employers operations where we were quickly able to confirm that, in fact, the agent had properly identified a real problem with the current classification codes.  The code being used was 3632, Machine Shop NOC which happens to be one of the most commonly misused and inappropriately applied class codes in the manufacturing category. Final carrier rates and loss costs for this class were in the $4/100 range making the premium this employer was paying somewhere around $60,000.

The correct class code for this employer should have been 3030, Iron or Steel Fabrication. You see, this employer produced a product that was structural in nature, it’s used to hold things up. Upon examination it was determined that the final carrier rates and loss costs for this class were in the $10-$11/100 range making the premium this employer should have been paying somewhere around $150,000! Now that’s a significant increase over what he had been.

The agent believed that once the error was discovered, and confirmed, it only made sense to work that issue into the presentation. The agent designed the presentation to highlight two separate but related issues, the class code problem and an existing, deteriorating experience rating issue. And that’s where the wheels came off the bus!

The agent provided the employer with the NCCI Scopes description of code 3030 and had the employer to read the description.  The employer was asked if there had been some kind of change in their operation in recent years, which might have accounted for code problem.  At which point he became irate indicating to the agent that no one was going to come into his business and tell him how to run it! That response was, to say the least, a surprise!

The final blow came when the employer indicated that if the agent was not going to help manipulate the system to benefit the employer then what was he doing there! Wow!

The agent then politely left having gained, at that point, full insight into that employers attitude.

I’ve worked with many different commercial insurance agencies and commercial insurance producers over the years providing assistance for their clients with workers comp classification issues, experience rating issues and a multitude of other workers compensation premium related problems found within our firms area of expertise. I have nothing but respect for these agents. They work hard to do a good job for their clients!

But once in a while I’m reminded how some employers out there have but one thing in mind when it comes to managing their workers compensation program. That one thing is to do anything and to involve anyone who will assist them in “manipulating the system to their benefit.”

Let me be clear. There’s a big difference between using the rules and knowledge about the workers compensation system to do things right by identifying and correcting discovered errors and the act of committing fraud! There was no doubt in the mind of this agent that their prospect employer expected the agent to lie about the employers operations to secure a lower workers compensation premium. And that’s a giant problem!

This agent walked away knowing he did the right thing. And in this case, doing the right thing lost him a big sale.

But then, isn’t doing the right thing always the right thing to do?

I hope this helps you out and thanks for reading!

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