How many times have you heard someone say “we just didn’t communicate?” That’s usually not a good thing! But isn’t that one of the most important things we do as human beings?
It seems a lot of the workers compensation audit work we do revolves around communication or maybe I should say miscommunication. We’ve found that many employers out there are uninformed about how the workers comp audit process works. Some employers don’t know enough about the policies they buy to ask the questions they should ask to keep them out of trouble. Many agents don’t educate their clients about the way a workers compensation deposit premium works or how the classification of employees works and how these play into the final audit. Many company underwriters are forced to rely on smart underwriting systems curtailing their ability to properly underwrite a workers compensation risk for the very carriers they work for. Auditors are given the task of gathering correct information to be used for audit purposes…regardless if the original information, established by the writing agent and reviewed by the company underwriter, was correct or not. And all along the employer is the one who gets to pay the bill…up front or at the end after the audit.
Don’t get me wrong here…I’m not pointing a finger at any single one of the people involved in the workers compensation transaction. If anything I’m pointing my finger at everybody!
We’ve seen time and time again how a lack of communication between the parties of a workers comp audit transaction creates premium problems. So here’s a short list for each participant to keep in mind.
Let’s start with the employer;
- When you’re shopping for workers compensation insurance coverage be sure to check out the agent that wants to sell you a policy. Make sure the agent knows how a workers comp policy works and has experience providing these types of policies and that you’re comfortable with their advise and knowledge.
- Make sure you fully describe the activities of your business to the agent and that you discuss the classification codes the agent wants to use for your employees.
- Make sure you discuss any 1099 or subcontractors or independent contractors you may use.
- Make sure you’ve provided accurate payroll or remuneration projection information to the agent and review how they’ve applied that payroll to the class codes on your policy.
- Make sure you stay in communication with your agent during your policy year. Let them know if there are any changes to your business operations or if your payroll has increased…you know…keep them informed!
- Be prepared for the auditor! After your policy expires an auditor will contact you and set up a time to review your business records. Make sure you have your records in proper order and include copies of certificates of insurance you’ve secured from all your subcontractors and independent contractors. And do not reschedule the appointment! Get it done the first time!
Now for the agent;
- Understand the product you’re selling! Take a little time and learn some of the finer points of the workers comp transaction. A little effort here will pay off big time later!
- Educate your client! There are many common premium issue pitfalls just waiting for your client to make a mistake in what they’re doing.
- Pay attention to what your client tells you and learn about their business operations.
- Be sure to probe and ask questions of your client. Don’t get caught of guard by making an assumption that you know all the activities of their business….ask the questions!
- If you are unsure about the proper class codes for your client make sure you ask your underwriter or contact the proper rating authority in your jurisdiction.
- Make sure you get the entity right! A problem that plagues both insurance carriers and employers.
- Make sure you discuss the inclusion/exclusion issues for Owners, Partners, LLC Members and Corporate Officers and the payroll requirements and limitations involved.
- If it applies, be sure to discuss experience modification factors and the effect claims have on your clients policy and ultimate cost.
- Inform your client about the workers compensation audit process. Prepare them for the audit!
- Learn where to find the correct answers to questions about workers compensation premium, classification and audit issues.
- Help your agents when they ask questions about classification codes.
- Make sure the business entity is correct!
- Know the inclusion/exclusion rules and proper remuneration.
- Be sure to understand the effects of experience modification factors.
- Be sure to understand all premium modification factors and their proper application.
- Keep open clear lines of communication with your agent, their client and your auditor.
And finally…the auditor;
- Make sure you follow the standards established by your insurance carrier or if an independent auditor, your employer.
- Understand your role as the eyes and ears of the insurance carrier in the information gathering phase of the audit.
- Complete the audit at the clients place of business.
- Verify business operations activities with knowledgable employees or owners of the business.
- Provide the business owner with copies of your audit worksheets.
- Answer all questions the employer may have about the audit process and it’s effects.
- Remember, it’s about communication! Many small employers are not educated about the workers compensation audit process, they look at your presence as intrusive. Do your best to help them understand the ultimate goal of the audit and it’s importance in the overall picture of workers comp.
My best friend and I quite frequently end up in discussions about communication and how it seems that so many people today just don’t want to step up and take responsibility. So many things can be resolved if you just take a few minutes to listen and talk. Maybe I’m just naive, probably about a lot of stuff, but so many of the audit problems we help resolve could have been avoided if the parties had just taken a few minutes to learn about the effects of what they do, listen to the other parties, educate and otherwise communicate for a common goal!
Hope this somehow helps you out! Thanks!