Consent to Rate Filings by QBE Insurance

 We've just come across something I think worthy of comment, something that seems...unusual, at the least. We;ve discovered that QBE Insurance is using Consent to Rate filings on a large scale basis to get the Workers Comp manual rates for individual policyholders significantly increased. We've found numerous filings in Georgia and Illinois but my suspicion is that if we look, we'll find the same thing going on in a number of other states as well.

What's the significance? Well, for one thing, I think a lot of companies kind of operate on the assumption that the manual rate used for Workers Comp classifications are largely uniform. Now, in recent times, that isn't exactly so, as insurers in a great many states are free to file their own schedule of rates for Workers Comp insurance.

But Consent To File allows insurers to use higher rates that apply just to a single policyholder. But they're doing it for a lot of individual policyholders, it seems.

The potential problem, I think, is that some of these policyholders may not do much, if any, comparison shopping for their Workers Comp insurance. And so they may be unaware that they are being singled out, on a voluntary market policy, for the application of manual rates that are just about (or just slightly lower) than assigned risk rates.

This is all perfectly legal. But my advice, to anyone considering a Workers Comp proposal from QBE, would be to comparison shop the hell out of  your Workers Comp insurance. And don't rely on a single agent or broker, as they may have a financial incentive to sell policies with these higher rates.

What the Hell is Going On With the Georgia Assigned Risk Plan?

 Most of my readers already know what Assigned Risk Plans are, for Workers Compensation insurance, but for those who perhaps don't recall, Assigned Risk Plans, although they vary from one state to another in the details, are all state-created programs to make sure that Workers Compensation insurance coverage is always available to employers, even when insurance companies don't want to voluntarily underwrite WC coverage for a particular employer. Typically, the cost of the coverage is higher than it would be through the so-called "voluntary market" but employers can get the required coverage, even if an employer is too small, or too new, or too risky, in the eyes of insurance companies.

In recent years, I've been getting a lot of calls and emails from small-ish Georgia construction companies, though, about what I've come to call "Shock Audits" for Workers Comp. And over time, what I've been seeing is leading me to the conclusion that something is deeply wrong with the Georgia Assigned Risk Plan, particularly for small to medium-sized construction companies.

Consider just two recent Georgia employers that have reached out to me in the past week or so:

Case 1 is a small construction company that was sold an Assigned Risk policy for Workers Comp with an initial premium of $1,500.00. This small hispanic-owned business has now been sued by Liberty Mutual (the assigned risk servicing carrier that wrote coverage for this contractor) for just over $2,000,000.

Case 2 is another small Hispanic construction company that bought an Assigned Risk policy in Georgia for around $1,500. This one has a collection agency calling, because the Assigned Risk insurer says he owes around $500,000 for the insurance coverage.

Seeing a pattern here? Small, unsophisticated contractors are sold inexpensive Workers Comp policies, only to have this required insurance blow up on them after the policies end, with staggering bills for additional premiums.

These are far from the only such cases like this I've seen--these are just the two that have called in the past week or so. And the more I look into these cases, the more questions arise.

For one thing, as I've examined the Georgia Assigned Risk plan rates, I've learned that the rates are astonishingly higher than Assigned Risk rates in other states.

Consider the Georgia 2024 Assigned Risk manual rate for classification 5645, which is the class with the most payroll assigned to it. That manual rate is $103.17 per one hundred dollars of payroll. 5645 is the classification for carpentry work on construction of residential buildings.

And so, for every one hundred dollars paid to workers, the Georgia Assigned Risk Plan wants one hundred and three dollars.

For comparison, the Illinois Assigned Risk rate for Code 5645 is $31.14 in 2024.

Now, Illinois tends to be a state with relatively good benefits for injured workers. It's not like Indiana, with relatively crappy benefits. Yet the Assigned Risk rate for Code 5645 is a third of the Georgia rate.

And if you compare the reported cost of claims in Georgia and Illinois (which the National Council on Compensation Insurance does) the average cost of claims under Code 5645 in each state is much closer (although Georgia is higher than Illinois.)

In Georgia, NCCI has calculated that the average cost of claims under Code 5645, for 2024, is $12.88 per hundred dollars of payroll. In Illinois, the average cost of Code 5645 claims is $7.03 per hundred dollars of payroll.

To make matters worse, in most of these Georgia Shock audit cases I see, the insurance company has placed the payroll for these small construction contractors into Code 5645. I guess maybe that's why, according to NCCI, code 5645 is the Georgia classification with the most payroll assigned to it.

So what the hell is going on with the Georgia Assigned Risk Plan?

I don't know yet. But I'm gonna find out. Stay tuned.

A Win For The Books in Georgia

 We just received notification of a win for a client down in Georgia over proper Workers Comp classification of their business. And this one is one for the books.

I had made a presentation on behalf of this client down at the Workers Compensation Appeal Board about a month ago. I thought we had a rock-solid case. I advocated to reverse a recent NCCI inspection that had assigned a much more expensive classification to this client. I made a strong case that the newly-assigned classification was wrong and that the Appeal Board should assign the less expensive class that this client had for years and years, before the inspection.

In spite of what I thought was a very persuasive case, we lost. The Appeal Board instead ruled that the much more expensive class should stand.

I was honestly surprised. And we were assisting this client with the further appeal of that decision when this notification arrived today. From the Georgia Department of Insurance.

The Georgia Department of Insurance overruled the Appeal Board and reinstituted the cheaper class I had been advocating for. Without the necessity of our even filing an appeal.

In all my years of doing this kind of work, I have never seen something like this. I have never seen a Department of Insurance overturn a decision by a Workers Comp Appeal Board without our having to even make an appeal of that decision.

I'm delighted by this turn of events, of course. And I'm intensely curious regarding what the heck happened, behind the scenes. I mean, the Department of Insurance had a representative at the hearing, a voting member of this Appeal Board. So someone at the department knew the arguments I had made and had heard the testimony of the business owner.

So now, on to my next case. Cases, actually, as in the plural. We keep getting phone calls and emails just about every day from small and medium-sized businesses, across the country, who need help disputing Workers Compensation insurance classifications and premium audits. Got two this morning, from different parts of the country. So I'm going to be a busy little insurance consultant, it seems, without too much time for resting on my laurels after this unexpected notification. But that's fine by me.

The Kind of Thing That Makes Me Angry

 I'm currently working on behalf of a small construction company. On their last Workers Comp audit, the insurance company couldn't be bothered to send out an auditor. So they instructed the policyholder to fill out a self-audit form. And the construction guy, trying to do the work of a trained premium auditor, made some mistakes. He caught them after he sent in the form, but the insurer wouldn't revise the audit. So he hired us.

As a first step, we went to the Dispute Resolution process offered by NCCI. I explained the problems--a guy who belongs in the clerical code got assigned to the carpentry class. Plus, I found that this company didn't even belong in the carpentry class--they are a painting company, and properly belong in the cheaper painting classification.

Insurance company just gave their official reply to NCCI. They told us to pound sand. 

Now, this galls me, because I know from experience that insurance companies routinely change these audits when it benefits them, sometimes years later. But when the policyholder wants to fix things, because construction guys aren't so well trained as premium auditors, the insurance company says "No takebacks."

My own initial first response is something less polite and more of an Anglo-Saxon type of exclamation. But that won't get us anywhere.

So now I have to roll up my sleeves, put on my thinking cap, and figure out how best to fight this. Because NCCI has kind of just shrugged at this non-response by Pekin Insurance and asked us if we can prove our assertions. And we're certainly looking into this.

But the thought occurs to me that is a classic example of how the system is not a level playing field. and how the insurance oversight system is not exactly a consumer-friendly system, in spite of places like NCCI having some very dedicated and helpful people. The system just is designed to put the burden of proof on the policyholder, Instead of insisting that insurance companies actually have to bear the expense and effort of getting these audits right, the system tends to push that off onto policyholders. Kind of like a mandatory self-checkout lane at Wal-Mart. Where the scanner sometimes reads a bag of apples as a vacuum cleaner.

Well, the game is afoot, I suppose. Time to see if I can make Pekin Insurance do the right thing. Stay tuned.

Interesting Settlement in an Expert Case of Mine

 I had recently been retained as an expert by the attorney for a specialized staffing company that had been fighting with a major insurance company for about a decade over Large Deductible Workers Comp premium charges. Prior to my retention, the case had not been progressing well for the policyholder. It was now in arbitration, and in spite of repeated attempts at settlement by the attorney, all such offers had been rebuffed by the insurer.

Interestingly, this was an insurer that had retained me as their own expert over the years, in multiple cases also involving Large Deductible Workers Compensation insurance policies for staffing companies. So I had some significant experience with the unique aspects of these policies and how this insurer underwrote those kinds of policies.

But it had been years since I had last done any work for this insurer and so I felt free to accept this assignment, although I still had to treat all my prior work and documents with confidentiality. 

Nonetheless, I was able to offer a preliminary report about issues with how these particular Large Deductible premium charges had been computed.

And interestingly, once I was disclosed as the expert retained by the policyholder, and the particular areas about which I would be testifying, a curious thing happened.

The insurer settled the case, on terms described as very favorable by the attorney who had retained me.

I don't know any more than that, really. I have no clue why the insurer elected to settle this case at this time, after having fought tenaciously for so many years. I would like to think my involvement in the matter played some part in this, but I will never really know.

Still, I believe a just settlement was reached, and that's what matters. Of course, because this case settled before I could provide any sworn testimony, it won't even appear on my CV. But still, I feel good about this case, and my involvement in it.

The Self Checkout Lane for Workers Comp Audits

 Today, I spent an hour or so helping a small business properly complete the self-audit forms their insurer had asked them to complete for Workers Comp and General Liability insurance. It wasn't particularly difficult but there were technical issues that were straightforward for someone trained in premium auditing but that were not so straightforward for a small business owner who didn't work in insurance.

We got the whole thing hashed out in a little over an hour and he was very grateful. But it put me in mind of something I heard a week or so ago, when I gave a presentation at the Midwest Insurance Auditors association. Some of the auditors present mentioned that their insurers are increasingly turning to remote audits or self-audits for smaller accounts.

The drawbacks of those developments are illustrated by my small business client I helped today--there are technical issues about what remuneration should properly be reported for WC, how that payroll properly gets allocated among classifications, and different technical aspects for the GL audit.

Insurance companies asking policyholders to self-audit reminds me of the increasing use of self-checkout lanes at Wal-Mart and other retailers. It's an aggravating action by large corporations to hold down their costs by asking the customer to do some of the work normally done by employees of said corporation.

Mind you, it's creating a new line of revenue for us, so perhaps I shouldn't complain about it. But it rubs me the wrong way. And when some aspect of the insurance industry rubs me the wrong way, I tend to write about it here.

So if your company gets one of these self-audit forms, or if the insurers says they want to do a remote audit (which can create similar but slightly different problems) keep in mind that Advanced Insurance Management can help, at very modest cost, to make sure you aren't inadvertently overcharged when you use the insurance industry's self-checkout lanes.

As I often like to say, in a perfect world I shouldn't be able to make a living doing what I do. Audits should always be done correctly and premiums should always be calculated correctly, by trained insurance professionals paid by the insurance industry.

Alas, we don't live in a perfect world. But at least we here at AIM can help make sure businesses aren't overcharged because of those imperfections.

A Sweet Win at the Illinois Department of Insurance

 We just learned today we prevailed at a legal hearing at the Illinois Department of Insurance, on behalf of one of our consulting clients. This small biz client had been overcharged by Sentry Insurance, by way of using a wrong classification code (and thus wrong manual rate.) At the hearing, Sentry argued that, because this insured had accepted a proposal that used the wrong classification code, this meant that the clear policy provision that stated that Sentry would ultimately use the correct class for premiums, even if different from what was originally used, was null and void.

The hearing officer found this argument unpersuasive, it seems.
Kudos to my son and biz partner Scott Priz who ably handled this legal hearing. (It's nice to have a brilliant lawyer as part of our firm, one who also has twenty years' experience with the fine details of the classification system used for Workers Comp insurance. This wasn't a huge case in terms of our fee--but it was a huge win nonetheless, against an insurer who seemed determined to avoid returning significant premium overcharges to a small company.