Misinterpretation and Assignment of Incorrect Class Codes By Insurance Company Personnel

It happens all the time. An insurance company employee makes a change on a policyholders workers compensation code that adversly effects the policyholder only to find out later that it was a mistake. No harm no foul you say? Not necessarly so! Let’s talk about why these kind of mistakes happen and the real, sometimes unknown, effect they cause.

We recently worked a case in Missouri where an inexperienced insurance company audit department employee changed the current term class codes for a policyholder based on her belief a code had been discontinued. This situation revolved around the discontinued use of 5651, a carpentry code, previously available for use in Missouri and it’s replacement code 5645, a residential carpentry code. In fact this policyholder was a commercial carpentry contractor exclusively framing commercial projects and had been correctly classed as 5403.

This comedy of errors began with a poorly completed audit. The auditor was to perform a physical audit but instead made contact with the policyholder’s accountant who provided payroll records as requested and answered a few questions. No interview was conducted with the policyholder and most of the audit interview section was completed by copy and paste from previous audits. You see, this policyholder at one time was a residential framer and did belong in 5645. But their operation changed and the auditor and insurance company did not. So the auditor, based on incorrect assumptions, assigned all payroll into 5645 the residential carpentry code and the policyholder received a very large additional premium bill from the insurance company. This caused payment and pending cancellation problems for the policyholder, all based on a mistake.

We conducted an audit review for the policyholder, discovered the error and provided accurate information to the insurance company who made the correction to the audit.

The audit department worker then discovered, at least they thought so (they thought that 5403 was being discontinued and replaced by 5645,) that a class code change should be applied to this policyholders current policy term and processed the policy change. This action significantly increased the policyholders premium, caused problems with their payment schedule and created a flurry of pending cancellation notices! When the policyholder received all this paperwork they contacted our office. We quickly discovered the error and communicated our findings to the insurance carrier branch manager who made the correction.

Even though the corrections were made, the damage was done.

So now I have to ask; Mr. Insurance Company, is this any way to treat your client? What do you think the policyholder now thinks about you and your operation? Do you think this instills confidence and trust?

Ok, maybe that’s a little harsh but I can tell you that this policyholder feels battered and mistreated. In fact they will probably be moving their business to another insurance company and all because an inexperienced insurance company audit employee mishandled a code.

Be sure to contact our office if you have a workers compensation audit or code problem. We may be able to help!

Hope this helps out. Thanks!

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