Workers’ Compensation Premium Recovery
get that money back for you.
Plenty of room for mistakes
Many business owners don’t realize the inherent risk of error in calculating their workers’ compensation premiums.
Experience Modifier (“Ex-Mod”) factors —Clerical errors, or missing/incomplete/inaccurate data can adversely affect your premium. For example, there may be instances in which information has not been updated. Some examples include:
- Any changes in employee classification codes
- Business expansion into another location
- Change in ownership
- New safety equipment or programs
- If your ex-mod is greater than 1.0, you really need to analyze what has been occurring.
Open Reserves —When there is a claim for workers compensation, the insurer sets up what is referred to as an open reserve, which is an estimate of the amount that the claim is expected to cost. However, if the claim settles for less than the reserve, and the reserve is not adjusted, the premium will not be reduced and you will continue to overpay.
Many business owners believe that in cases where the claim has settled for less, the insurer or the broker reports that fact to the rating agency and the premium is automatically reduced. Unfortunately, that is not the case. It is not the broker's or the insurance carrier's responsibility to report the new situation to the rating agency.
Therefore, even if your business has worked hard to reduce premiums by means of safety programs, or additional employee training, you should still perform a look-back at the years when your premiums were higher. Usually, there is opportunity to receive a premium refund.
Payroll Exclusions —There are at least a dozen or more items that are often included in payroll calculations but actually should not be.
If, for example, tips, pay for active military duty, worker uniform allowance, and excessive overtime are erroneously included in the premium calculation, you will pay a higher workers' comp premium than you should.
The disadvantages of over-preporting payroll are that: 1) you reduce your cash flow throughout the year; and 2) you then have to fight to get that money back.
Classification Codes —In determining Workers' Compensation premiums, insurers use more than 700 worker classification codes; actually, more than 2,000 if you include all the state special codes. Add a complex system with many players and you have the likelihood of many costly errors.
“But we already get audited”
Ask yourself this question: Has your carrier ever given you a return premium credit due to a previous error that the carrier or one of its auditors identified?
The fact is, the annual “audit” is performed by the carrier and is not independent. And the goal of the audit isn't to uncover previous mistakes. The goal is simply to compare actual year-end payroll to the estimated payroll that was used to calculate your premium.
Our audit is designed to save you money
At the end of the insurance company’s audit, the auditor determines whether you owe additional money or should receive a refund.
As you can see, their audit is little more than a settlement process. There is little attempt to see if errors have been made which could possibly result in the return of even more premium money to you.
The reason your carrier and broker don't usually discover these errors isn't malfeasance. In our experience, most carriers and brokers try to do right by their clients, and they act ethically. The real issue is that they do not have the responsibility or the expertise to perform the deep and detailed reverse audits that we do.
It is obvious there is enormous opportunity to recover money that you’ve overpaid. We go over each category in which there are potential errors to find out which ones may have been made. We will find any overpayments. And our experts will negotiate on your behalf to secure any money you’re owed.
Moreover, you can be confident in the accuracy of our audits. There isn’t just one person reviewing the audit. Our strategic partners make sure that multiple experts review it, so they don’t miss any cost-saving opportunities.