Why are insurance companies so unreasonable when it comes to audits and classification codes? A recent discussion with an insurance agent.

I recently received a call from an insurance agent with many years in the business of providing and servicing workers compensation policies for his clients. We talked quite a bit about the current state of workers compensation, the market place and, of course, about insurance carriers and their attitudes. He started the conversation asking “Why are insurance carriers being such a pia these days when it comes to audits and classification codes?” His question stuck with me and I thought we should talk a little more about it.

These days insurance companies are rolling in the cash when it comes to workers compensation! Legal environment changes that have occurred over the past decade are proving profitable for the insurers. Tightening up of state statutes have led to increased profits and less costly claims. Simply put, workers compensation insurance carriers are making money. NCCI predicted that workers compensation insurers would end 2014 with somewhere around a 96% aggregate combined ratio, down significantly from the 115% of 2010 and 2011. This plus gains from investment and operation efficiencies have put most carriers in a good position when it comes to making money in workers compensation. Sure, part of the good news is because insurance carriers are now in a position to charge more premium and it’s those additional premium dollars going to the bottom line! 

With all this good news for workers comp carriers wouldn’t you expect a little leniency? Wouldn’t you expect them to treat their clients a little better when it comes to audit problems and code disputes?

Why would you think that?

We’ve worked quite a few cases this summer where interpretation of manual rules and application of class code descriptions have been the focus of dispute. We’ve been involved in several appeal situations in different states where working an appeal up the ladder resulted in an agreement with our point only to find the insurance carrier once again appealed to the next level just to maintain their position.

Frustrating, but it happens.

This summer we’ve seen an increase in litigation surrounding audit and class code disputes. Insurance carriers have turned their policyholders over to collection and have sued for, in their opinions, legitimate outstanding premium generated from audits that are often discovered to be incorrect.

We’ve certainly seen an uptick in this type of activity.

Carriers seem to be more aggressive and seem to be taking a much harder stance when it comes to audit and class code disputes with their policyholders. We’ve also seen more action taken by fraud department units.

What’s the take away?

How about this…Employers, Insurance Agents and Policyholders Beware! There’s many pitfalls when it comes to workers comp that can trip you up and most of these become very expensive mistakes! Be vigilant in your efforts to correct a mistake but be sure to follow the rules for appeals and disputes.

Hope this helps you out! And thanks for reading!