Why Every Business Needs Someone Like Me

That sure seems like an egotistical headline for a blog post, but I hope readers will bear with me and let me explain. I'm not saying every business needs me, exactly (although that would be a nice thing, from my point of view) but rather that they need someone like me.  And this has to do with the rather unique, emerging specialty that I've been working in for the past thirty years or so. That specialty is the independent consultation and review of Workers Compensation premium charges.

Don't get me wrong--we help a lot of companies, big and small. So do our competitors, scattered around the country. But all of our combined clients constitute just a tiny, tiny fraction of all the businesses that buy Workers Compensation insurance. So despite all our best efforts at marketing and promotion, most companies don't really know our industry exists.

Yet I am firmly convinced that most, if not all, businesses that purchase Workers Compensation insurance would benefit from using the services of someone like me.

Consider this analogy: almost every business of much size hires an independent professional accountant to do their bookkeeping and taxes.  You just don't want to trust the IRS to figure your taxes, even though you could. Most businesses find it prudent to hire an independent professional because tax rules are complicated and they figure (correctly, I am sure) that the cost of such an independent professional is worth the expense to avoid paying unnecessary taxes or penalties.

Well guess what? The rules governing the computation of Workers Compensation insurance premiums are complex as well, and perhaps less well understood generally than the tax laws. Most of the people who know these rules well work for the insurance companies--and their training and management tend to focus on finding mistakes that serve to reduce premiums, and not so much on catching any mistakes that increase premium charges.

Ah, some folks say, but that's where our broker comes in--that's why we pay him those commissions. Our broker/agent takes care of that for us.

That sound you now hear is me clearing my throat dramatically. Because in every single case where we've found and fixed premium overcharges, the client had an agent/broker. And usually a good one. It's not like we only find overcharges for clients who have sloppy agents.

The problem is that agents/brokers aren't usually well-trained in the complex rules that govern Workers Comp premium computation. They know the basics, sure--but they're not specialists. And even when they do think they've spotted a problem, the insurance companies take anything they say in this regard with a huge grain of salt. The insurers tend to dismiss a lot of the input of agents/brokers in this regard because the insurance companies know that their own underwriters and auditors have a lot more training and experience in these technical areas. And they also expect that an agent will take the policyholder's side because the agent is trying to keep in good graces with his customer.

The other handicap agents and brokers have is that they can't be seen by the insurers as being too antagonistic to the insurance companies interests, because that agent may well need that same insurance company to give him a good quote on another account next week, or next month. So the agent/broker can't step on too many toes at the insurance company.

That's part of the reason why my company gets hired by insurance agents to help their clients sometimes--they understand that we can help clients when they can't.

The rules governing Workers Compensation insurance premium are complicated, as I said earlier, and can involve the interplay of multiple bureaucracies. Often, to correct an overcharge for a client, we end up working not just with the insurance company but also the appropriate rating bureau and maybe even state insurance regulators. Because these separate operators don't always work together as effectively as one might wish.

To correct an error in an experience modifier, for instance, often requires us to work with the rating bureau, a past insurance company, and possibly a different insurance company that writes the current policy. Sometimes, we also have to work with state insurance regulators, to prod recalcitrant or reluctant insurers to file the corrected reports on a timely basis.

Because we work with these fine details of the system every day, we know how things are supposed to work--and where they often fall between the cracks. It's a specialized field within the insurance industry, one that is still poorly understood by many.

But it is in the interests of businesses to understand that this specialized service exists, and how they could benefit from it.

As I often like to say, if your business doesn't trust the IRS to figure your taxes, why in the world would you trust your insurance company to figure your Workers Comp premiums? As a wise man once suggested, "Trust, but verify."

Pros and Cons of Using a PEO for Workers Comp

I've seen a couple of online items recently on using PEOs for Workers Comp coverage. They reminded me that I addressed this issuehttp://voices.yahoo.com/pros-cons-using-peo-7321914.html a little while back, and some readers might not have seen that.

The bottom line remains that there can be advantages, but lax (more like non-existent) regulation of the industry also creates potential problems for employers. Take a look, and let me know your thoughts and experiences.

Delaware Lt. Gov No Fan of Rating Bureau

Delaware's Lieutenant Governor, Matt Denn, has criticized Delaware's Workers Comp Rating Bureau for treating the rate making process "as the equivalent of a rug bazaar", proposing excessive rate increases with the expectation that it will be negotiated down.

Treating Workers Comp rates as something of a political football is hardly confined to Delaware, of course. But one would hope that rating bureaus would take something more of a factual, actuarial approach to Workers Comp rates. Of course, Lt. Gov. Denn probably isn't a disinterested observer of the process. He is, of course, part of the political process. And he was speaking to his state's Bar Association, themselves not impartial observers to a considerable extent. And so it goes.

Change in AZ Bad Faith?

A new bill introduced in Arizona would move bad faith actions against insurers for denying Workers Comp claims from the courts (and thus away from juries) to the state's Industrial Commission.

Not sure how good or bad this idea might be. Anything that makes it more difficult for injured workers to get justice would be bad, but there are also a lot of fraudulent or exaggerated claims in the Workers Comp world. Comments from readers always welcomed.

Good News For An Alaska Client

Got a nice email today from a client in Alaska. We had helped them appeal a recent change in Workers Comp classification code that had been made by NCCI. The change in classification resulted in a a tend-fold increase in rates and premium, an increase so severe that it threatened the continued viability of the business.

Our review found that the classification assigned by NCCI was incorrect and excessive, given the actual nature of the work done by the client's workers, and so we wrote a detailed report explaining why a much less expensive class was really the correct and appropriate one. We also provided testimony via phone at the appeal hearing. And ultimately the appeal board in Alaska agreed and overruled NCCI, assigning the much less expensive classification we had advocated for.

It's always gratifying when our efforts can make a difference and help a business avoid being crushed by excessive Workers Compensation insurance premiums.

Disputing a Workers Comp Audit

When an employer strongly disagrees with the results of a Workers Comp premium audit, there can be an understandable tendency to ascribe base motives to the auditor and to vent one's frustrations in unmistakable terms. But this can be a mistake, giving the insurance company a basis to dismiss legitimate objections.

Here are some thoughts and strategies regarding how to effectively dispute a Workers Compensation insurance premium audit.

"Tis The Season

...For Workers Comp audits, that is. Yes, now that the holidays are over and Santa has safely returned to the North Pole, employers whose Workers Comp policies expired in late December or early January can now anticipate a visit from someone else who makes regular rounds every year--the premium auditor.

An awful lot of Workers Comp policies expire with the calendar year, and so premium auditors everywhere are starting to reach out and schedule audits for those policies. Unlike Santa's annual trip however, these visits sometimes do not spread joy and happiness across the land. Sometimes, premium audits become occasions for dispute, distress, and despair--especially if the audit generates unexpectedly large amounts of additional premium charges.

Employers need to pay their fair and appropriate WC premiums, of course. But sometimes, due to poor communications and documentation, the audit process can become a bit of a nightmare for the insured employer. The insurance industry does not always do as good a job as it might in communicating in advance just how premiums will be calculated, and business owners and managers can receive very unpleasant shocks when those audit bills arrive.

A bit of preparation can help reduce audit friction and pain. For our suggestions, take a look at our website advice for employers.