Insurance Agents – How to save your workers compensation client $150,000 premium from an undiscovered policy mistake!

I often talk about how using an independent workers compensation consultant can improve client services offered by insurance agents. Today I want to share with you a recent success story about this topic. While I must protect the identification of all parties involved I’m sure you’ll still find this story of interest.

Earlier this year we were contacted by a commercial insurance agent, working with a large national brokerage firm, seeking assistance for one of his large workers comp clients. We had worked with this agent in the past to a successful outcome with one of his clients and when presented with a rather costly audit problem for this client he recontacted our firm.

The initial contact concerned a question about Health and Welfare Benefits, as required under the Contract Service Act (CSA) commonly known as Fringe Benefits, and whether or not they should be included as ratable remuneration (payroll) on a workers compensation policy. This client had recently changed insurance companies and had just completed their first audit with the new company. The auditor picked up fringe benefits paid to the employees and included it as ratable payroll. This action contributed to a significant increase in premium for the client who was presented with an audit bill in excess of $300,000.

Here’s the situation that was presented to us. This client had been with the same insurance company for many years. The insurance company auditor was the same for all those years and one who was familiar with the clients operations. Fringe benefits were not included on those audits so the client was surprised when the new insurance company included them on their audit. They believed that there must have been a mistake and contacted their agent. We were then asked to review the audit.

We provided the agent and his client with verification and documentation supporting the action taken by the insurance company to include fringe benefits as ratable remuneration. Something I’m sure they didn’t want to hear.

However, during our audit review, we also discovered a significant code error issue. This was a previously undiscovered mistake in classification. Working with the agent and his client we were able to assist them by having the proper class codes applied to the policy and corrections made. Those corrections resulted in a $150,000 correction being applied to the audit.

What’s the lesson learned when dealing with workers compensation audits?

  • Never assume that only one problem exists on an audit.
  • What may seem to be an obvious problem may in fact be correct.
  • A closed door may actually lead to an open door.
  • Agents and their workers comp clients should seek out and use the service of an independent workers compensation consultant!

If we had not been asked to review this case by the clients agent it’s very likely the code error would have never been discovered, as their focus was on another perceived problem, and this client would have paid $150,000 more in premium than they needed. These situations do occur in real life.

So if you’re an insurance agent or broker, listen up! Let us help you with your clients. Why not contact a workers compensation consultant and have them look over your client’s workers comp audits or classifications? Or take us in with you on a new client? You may be surprised how we can help!