Recently, the insurance trade magazine Insurance Journal wrote about how widespread the problem of payroll misclassification is in Workers Compensation insurance.
Of course, some of us have been pointing this out for decades. After all, Advanced Insurance Management has been helping employers fight this kind of misclassification since 1987.
In fact, our very first client, back in 1987, had suffered from misclassification of one of their subsidiaries, and AIM was able to successfully recover those overcharges, going back four years.
And in all the ensuing years, misclassification of payroll has remained one of the most common, and one of the most expensive kinds of Workers Compensation overcharges that we find and fix for employers.
For example, one of our most recent cases involved a Chicago area meat processing company that had been misclassified for years. Their insurance company had been misclassifying them as a company that cooks meat, when in fact they properly belonged in a less expensive classification for companies that merely slice meat.
Correcting this misclassification ended up with AIM recovering $80,000 in past premium overcharges for this client.
Payroll misclassification occurs because the insurance industry makes the rules regarding Workers Comp classifications just complicated enough that the industry itself makes errors routinely.
And although the insurance industry devotes considerable effort to spotting misclassifications that lower premiums (and thus cost insurance companies money) they don't devote anywhere near the same kind of effort to correct misclassifications that improperly increase premiums.
As I have often said, in a perfect world I should have to do something else to make my living, rather than correcting all the overcharges made by insurers. But for better or worse, we don't live in that perfect world.