RISK SOLUTIONS—I won’t deny it. I love my job. My bosses are Risk Managers and they work hard every day to help protect businesses and save them money.
Part of my job is to write about Risk Management issues, so that businesses like yours—businesses that need us—can find us!
Recently, one of my bosses, Mr. Walter Haney, Sr., saved a company $12,000 on their Workers’ Compensation Insurance Premiums.
Since some companies may be unaware that simple errors can create unfounded overcharges on Workers’ Compensation premiums, I felt this situation might make a good example.
Especially because of the happy ending…this client’s Workers’ Compensation bill was ultimately turned into a refund check!
Becoming Aware Of The Problem
Mr. Walter was contacted by one of our clients when they received an additional bill for their Workers’ Compensation Premium after an insurance audit.
“They received a bill for more than $6,000,” he said. “They’d already paid around $18,000 for their Workers’ Compensation. I knew what they should have been paying based on their payroll and that something was wrong.
“I can look at your payroll and tell you about what your Workers’ Compensation Premium ought to be. I knew this client should have been paying around $11,000 or $12,000.”
Mr. Walter said he also suspected right away that a portion of this company’s payroll had been mis-assigned.
As this company deals with Waste Control, its employees are assigned to only two Workers’ Compensation Code categories—clerical and drivers.
So, his suspicions included:
- An excessive payroll amount was possibly used for the audit; and
- Employee codes were possibly mis-assigned on a portion of the payroll.
Suspicions Are Confirmed
Mr. Walter requested a copy of the insurance company’s audit work papers. When they arrived, it didn’t take long for him to locate the mistakes.
“From looking at the audit work papers, it was very apparent,” he said. “As we had suspected, they had mis-assigned a portion of the payroll and they had excessive payroll on the audit.”
But Mr. Walter didn’t stop there. He was determined that this company would only pay what it should be paying based on accurate figures.
Reconstructing The Audit
Going back to the client, Mr. Walter asked for more information. He requested all of the employees’ names and a description of their jobs. He also wanted the amount of payroll monies paid out—by employee and by classification code.
Mr. Walter checked which codes these employees should have been assigned to based on his 40 years of Risk Management experience. And then he compared it to the codes that had been used for the audit.
He also recalculated the entire payroll for all of the employees according to the correct classifications based on the work they produced.
“I did a new audit,” he said, “very much like the people who had done the previous audit. And it came out to what I thought it would be.
“Rather than owing $24,000, this company only owed $12,000 in Workers’ Compensation Premiums.”
The two mistakes that nearly cost this client $12,000 MORE dollars, but actually turned into SAVINGS of that same amount, are frequently found by Risk Managers.
“It was a combination of too much payroll and a significant payroll amount being placed into a higher classification,” Mr. Walter said. “So, it was an overstatement and a mis-classification.
“They had mis-assigned a part of the payroll to the drivers when it should have gone to the clerical part of the payroll.”
Later, the insurance company realized this mistake was due to a simple clerical error with code entries. Their software had two places that required codes—one area was for a code for Workers’ Compensation and the other area was for a code for the employee position.
And because some of the workers had been given the wrong code, two different problems were created with one error.
Workers’ Compensation Errors Are Not Uncommon
Mistakes in Workers’ Compensation calculations are not uncommon. Insurance companies can make mistakes (like this example), insurance auditors can make mistakes, and even companies sometimes make mistakes themselves.
“If the client makes a mistake, we can get that straightened out, too,” Mr. Walter noted.
Risk Managers know where to find the errors in Workers’ Compensation codes, classifications and calculations. My bosses can check for them all, including any issues with Experience Modification Factors.
Most companies have no idea that anything can be done about their Workers’ Compensation costs.
But I’ve learned that an audit premium bill doesn’t necessarily mean it’s a done deal.
“Many companies would have paid the bill, fussed about it a little bit and let it go,” Mr. Walter said. “Most clients don’t know how to redo audits and most insurance company auditors are not going to re-check their work.”
But because American Risk Managers “had their back,” Mr. Walter made sure the Workers’ Compensation over-charge was refunded. He even continued to follow up until the check was cut and mailed to the client.
“By becoming involved in the audit, by knowing how to do our own audit and by taking our client’s position on the audit, we were able to reduce their charges by $12,000 and return a net of $6,000 to them of previously paid premiums,” he said.
‘We Operate At That Level’
All of my bosses really love helping clients save money. Besides Workers’ Compensation, there are many other Common Types of Risk Management Issues that they can help your company with.
Could your company benefit from some professional Risk Management expertise? Do you use other professional services?
Mr. Walter provided a couple of examples using accountants and lawyers.
“Risk Managers work for your best interest just like accountants who are filling out income tax forms,” he explained. “If you’ve got somebody filling those forms out for you who understands tax laws, then your chances of having a mistake are almost nil.
“If you go in there and try to fill out your own income tax forms, you might get it wrong, simply because you don’t know tax laws. And that’s the reason you’ll hire a lawyer if you’ve got some sort of legal problem.
“Independent Risk Managers are just like those sorts of professional consultants,” he concluded. “We operate at that level.”
For more information on insurance audits, including other common errors and the top reasons for audit increases, please visit “Top Reasons Why Audits Increase Commercial Insurance Costs.”
And don’t hesitate to get in contact if you’re in need of Risk Management advice and advocacy.
My Bosses Can Help Your Company, Too!