The WorkCompEdge Blog

by Frank Pennachio, WorkCompEdge Regular Contributor

The recent posts to the WorkCompEdge blog and forum about Vicki’s premium audit experience struck a chord with me. Sometimes it gets terribly lonely feeling you are the only sane person engaged in a dialog. There have been many times in my experience as a work comp agent when I’ve wanted to throw my hands up and say to an auditor or underwriter, “What color is the sky in your universe?”

In other words, “What are the rules you’re playing by?”

Now, before any auditors or underwriters get upset with me, let me be quick to point out that they do have rules, and they are playing by those rules. From my perspective, those rules sometimes require me to suspend common sense and my orientation toward what seems fair as I address issues related to a workers compensation insurance policy. But I’ve already wasted too much of my life force debating fairness and common sense with insurance company underwriters and auditors.

You’ve got to know those rules! If you have trouble viewing the video, try this link.

What I’ve come to appreciate is that the rules are the rules regardless of what may seem logical or fair in a certain case. So, instead of cursing the dark, let’s turn on a light. Our best strategy – as employers and the agents or other professionals who help employers – is to learn the rules.

This could not be truer than in the premium audit process. Commonly, numerous rules are never explained to the employer; sometimes, those numerous rules are executed incorrectly, resulting in overcharges to the employer. In no way do I suggest the auditor or insurance company has nefarious intentions. It’s simply a difficult business challenge – for both insurance companies and employers – to complete an accurate premium audit.

Premium auditors have a thankless job. They are not usually treated as a welcome guest when they arrive, but as an interruption to an already busy day. Auditors are usually facing deadlines and under pressure to get audits done fast. Pressure to get things done fast does not create an environment conducive to education and accuracy.

As an employer, therefore, you must commit to educating yourself – and following through with the processes that will assure an accurate audit.

If you’re a WorkCompEdge member, there’s a module and workbook to help you do that. But as Vicki’s experience attests, you can also root out this information from manuals from the appropriate rating bureau (such as the NCCI Scopes Manual). I heartily agree with her mention of the Ed Priz guide as a great way to become familiar with the process. Here’s a sampling of issues that, when addressed appropriately, may save you money:

• Are your employees classified appropriately for their job function? If your administrative assistants are accidentally placed in the same class as your construction workers, then you’re being overcharged. If any subcontractors – who in almost all cases should have their own wc insurance – are listed on your audit, then you’re likely being overcharged.
• Are your corporate officers exempt or non-exempt from workers comp insurance?
• Are excluded remunerations – such as tips, incentive payments, employee discounts, payment for active military duty, certain overtime payments and a host of other things – really being excluded from your audit bill?

Kory and I entitled this entry “Playing by the Rules for Fun and Profit.” We have to admit that maybe there’s not a lot of fun in navigating the intricacies of a premium audit – but those same intricacies really can be a source of overcharges you can eliminate. And who doesn’t have fun saving money?

Are your premium audit experiences an aggravating mystery to you, a triumph of good recordkeeping and cost savings, or something in between? Let us hear from you.

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