Workers compensation audit reviews can reveal costly errors
Employers looking to reduce comp premiums find clerical slips that can cost them dearly
With workers compensation rates firming, some employers are pressing for reviews of their workers comp audits with an eye to lowering their premiums.
Some of the those reviews are turning up clerical errors and misclassifications that can cost employers as much as hundreds of thousands of dollars in overpaid premiums and adversely affect their financial profile.
By checking industry classifications and experience modification calculations, companies can ensure that their comp premiums are in line with their employment numbers and loss experience, said Lisa D. Costello, senior risk consultant at Willis North America Inc.’s strategic outcome practice in Overland Park, Kan.
“I think more clients will request this service as the (workers comp) rates increase and those increases get traction in the marketplace,” Ms. Costello said. “I think the better question is: How many employers or insureds know that there’s even an issue?”
Ms. Costello said about one out of five audits that Willis reviews for clients have clerical errors, while about one in three ex-mods includes a mistake. About 10% of Willis’ clients that go through the audit review process receive a partial premium refund, she said.
Aside from the total cost of workers comp coverage, Ms. Costello said such errors can affect a company’s lending profile and even its ability to win contracts.
“This is a significant problem for contractors, because if their (ex-mod) is incorrect because of a clerical error, they’re prevented from bidding jobs and they may not secure the bid because their mod is too high,” she said.
Simon Feuer, president of Apex Services Ltd., said he’s seen more companies requesting workers comp premium recovery services as the economy has improved. The Cedarhurst, N.Y.-based company seeks refunds for employers that have overpaid their workers comp premiums.
“They see their premiums going up and they’re looking for solutions to get their premium down to what it was,” Mr. Feuer said.
Most of Apex’s clients include employers with annual premiums in excess of $100,000. Errors in their policies typically stem from miscalculated ex-mods, Mr. Feuer said.
Audit reviews can help companies looking to contain their workers comp costs, he said.
“We go and knock (the premium) down, and they have a better underwriting profile in the marketplace,” Mr. Feuer said.