You can control the cost of your organization’s workers compensation insurance by knowing a few insider tips used by workers compensation cost control specialists. What follows are two proven methods to reduce the cost of this vital insurance to the absolute minimum.
Your Experience Modification
Most employers accept the experience modification as an absolute number, with few options to improve. That is a mistake that can cost large sums of money and put the
employer at a competitive disadvantage.
Here is how you can improve your ex-mod. Begin by obtaining a copy of your Experience Rating Worksheet. This document contains the payrolls, claims, and other factors that make up the ex-mod. You should have received a copy of the worksheet in the mail, but if you did not, it is available from your insurance agent or broker, direct from the insurer, or by ordering a copy from the NCCI in Boca Raton, Florida.
With that worksheet in hand along with an up-to-date loss run, check the following: Make certain the claims that have been charged to the ex-mod under the column labelled “Act Inc Losses” belong to your firm. We have seen firms charged for claims that belong to someone else, so it is a good idea to confirm that your ex-mod contains only your company’s claims.
Be aware of your loss valuation date and make certain that every claim possible is closed before that date. Generally, the date is six months before the ex mod becomes effective. Otherwise, your ex-mod might include an open claim reserve that was settled. Remember, you can request the insurer’s claims adjuster to close claims before the loss valuation date.
Confirm that the insurer has correctly determined and deducted “loss adjustment expenses” from incurred losses. These are the insurer’s expenses and should not be charged to you. Finally, check the payrolls and confirm that the amounts used correspond with the underlying audits.
Get the most from classifications
Know that, in general, premium auditors are not permitted to add new classifications. While this is contrary to procedures followed by several large insurance carriers, provisions within the policy and elsewhere require that, if a class code is to be changed, it must be changed by the underwriter and not the auditor.
Also, in the case of contractors, they may allocate the payrolls of construction employees to different classifications of work, provided that the contractor keeps contemporaneous records that support the payroll allocation. They should preemptively discuss how to set up the payroll records with the insurer’s audit department so that wages are assigned to all the eligible classifications.
Another premium saving suggestion is to prepare a pre-audit before the annual audit. In completing its annual premium audit, the insurer works from the records that you provide. Help make the auditor’s job more accurate by completing your own audit. Make certain that the prepared payrolls take into account all the credits, limitations, and deductions available. Many auditors will accept your prepared work as their own.
Finally, when the audit is complete, request a copy of the auditor’s worksheets, review the worksheets with him or her and discuss how employees were classified. Then, when the final invoice arrives, be sure to compare it to those worksheets.