Over $23,000,000 in Premium Overcharges Have Been Recovered by AuditRate!!!

• 2010 - Audit Rate recovers over $600,000 for a medium-sized Rockford-area manufacturer! Click to read more.
  
  
• 150 vehicle fleet trucking firm was overcharged in excess of $800,000 as a result of their insurance broker falsifying accounting statements, and altering insurance contracts without the client's knowledge. Refund received by client in the form of a cashiers check three weeks after AuditRate took on the project.

• 1,000 employee electronics manufacturing firm saved $638,000 by having AuditRate compete work, which the insurance company couldn't.

• 500 employee plumbing goods manufacturer was overcharged by $1.2 Mil as a result of their insurance company applying incorrect factors in the calculation of their premium.

• 200 employee laminating firm was overcharged by $200,000, due to errors in their rating calculations.

$20,000 SAVINGS ALMOST MISSED

A wholesale distributor received a windfall when we uncovered a workers' compensation classification error. In 1997 the NCCI (National Council on Compensation Insurance) changed the classification for this type of distributor to better reflect the nature of their business, but this firm's policies were never amended to reflect the lower rated classification. They received a refund of over $20,000.

BEWARE OF AUDIT CHANGES

Because of large claims and inadequate premiums, insurers are trying to increase premiums. One method is by stricter (and often incorrect) interpretation of final policy audit rules.

We discovered one insurance company was aggressively interpreting rules to their own best advantage. They had a different meaning for the words "duly appointed". The insurance company defended their actions (which would have cost our Client over $18,000), contending that all the previous companies that had audited this firm in the past 20 years were wrong. After providing the insurance company with an elaborate dissertation and research supporting our correct procedure, the insurance company withdrew their efforts to collect their erroneous $18,000 charge.

Unless you have a comprehensive understanding of the correct application of the many rules that make up the premium calculation process, you would have no way of determining if your insurance company is applying correct procedure when they audit your exposures.

AGENT DECLINES CLIENT'S REFUND

We uncovered an error for a manufacturer resulting in a refund of $12,058. The insurer would normally process the refund through their insurance agent. However, their agent refused to accept the refund from the carrier - probably because they would also have to refund commission. We were able to convince the insurer to issue a check directly to the manufacturer, and bypass the agent.

COLLECTING REFUNDS IS CHALLENGING

A manufacturer had been insured with three insurance companies in a six year period. All had made overcharges originating from the same error. We approached the three insurers to obtain refunds on the excess charge. Two insurers refunded the overcharges, and one refused.

Why would two insurance companies respond on a businesslike basis, and one conduct themselves with a "buyer beware" attitude? Would the refunding of $30,000 in unjustly charged premiums bankrupt or interrupt the operations of a multi-billion dollar corporation? We don't think so, nor would you. However, to a manufacturer who pays $150,000 a year in insurance premiums, the refunding of $30,000 is very important. To net $30,000 in profit, this firm would have to ship $600,000 in sales, in today's world of competitively priced goods.

Finding the error takes ingenuity. Negotiating its recovery requires even greater skill.

COSTLY RELATIONSHIP

Insurance buyers are sometimes told they must use a specific insurance agent . . . for one reason or another. When it's too easy, the quality of the service is sometimes compromised. We recently encountered just that situation, and corrected six errors for a Client who had to change insurance agents because of a business relationship. We have recovered over $96,000 of premium overcharges for this Client.

COST REDUCTION SERVICE - ONCE IS NOT ENOUGH

If your insurance program was critiqued by AuditRate in the past, don't be overly confident that our improvements continue to be properly administered by your insurance broker. We recently were called upon to reaudit a Client we consulted with over 10 years ago. At that time, we corrected errors in interpretation which saved our Client tens of thousands of dollars. We were not surprised to note that after a period of years, the same "old" incorrect application of rules were applied again. This time the cost to the Client was over $114,000 in improper insurance costs.

ARE YOUR PREMIUMS "ABOUT THE SAME" FROM YEAR TO YEAR?

In tracing the calculation of rates on the general liability coverage for one of our Clients, we discovered the insurance company rating department incorrectly placed a decimal point in their rate calculation, resulting in a $9,000 overcharge. In rating the renewal, the carrier uncovered their error, partially reduced the rate on the renewal, but did not reduce the rate on the expiring policy. This overcharge continued because the agent and the Client only compared overall prices from one year to the next. They were happy with the reduction they received. We exposed the rating error to the insurance company, and our Client's premiums were further reduced. Just because your premiums remain somewhat stable, or even reduce, from one year to the next, doesn't mean they are correct in the first place.

3 LIABILITY ERRORS X 5 YEARS = $19,000+ REFUNDS

When auditing one Client's liability policy, we found three errors:

1. The manufacturing Client was being charged for a parking lot even though the manual rules clearly stated that parking lots are included, without additional charge, for this type of operation.

2. This parking lot was leased from another entity, which was named on the policy, as required by the lease. Even though the manual permits additional insureds to be named in these circumstances without charge, a charge was made for including this additional insured.

3. The use of Client's building was changed in 1988, but the revised use was never reflected on the policy. The premium charge should have been eliminated once the use was changed.

Although the Client is happy to receive five years of refunds, amounting to over $19,000, they might be entitled to even more. Unfortunately, we can't go back further due to lack of policy information. Keep your policies and audit work papers, so you won't run into this problem in the future.

GENERAL LIABILITY RATING ERROR

A service company was improperly classified as a manufacturer/processor on their general liability policy. Businesses are assigned to one of five categories, and one of seven premium bases are used, depending on the category of business. While the bases of premium did not change in this situation, the category within a grouping was changed to correctly anticipate the exposures.

The incorrect rating caused them to pay $3.24 per $1,000 of sales for this coverage. We corrected the interpretation of the underwriter, and lowered the rate to $2.10 . . . a 35% reduction!

REGULATORS POSITION MAY BE WRONG

Soon after we notified an insurance company of an overcharge error, they informed us that the Client's agent had questioned this matter years ago, and that they had been instructed by the rating bureau which administrated this process "what was correct". To substantiate their position, the insurer gave us copies of the original letters. The insurance agent informed their Client we were wrong, and not to expect any money back. Our review of the documents proved to us that we were correct. When we informed the regulator of their error, we were initially turned down when they maintained their original stand. We persisted in defining the manual rules to overturn their position, and the bureau finally agreed with us. The insurance company processed a refund totaling $29,964.

DEAD STORAGE FILES PRODUCE VALUE

Insurance companies know that their policyholders don't keep copies of old premium calculations, loss runs, and other data that are necessary to determine if overcharges have occurred. Realizing that it hinders us if we have little or no documentation to review, insurance companies occasionally ignore our requests to send us copies of their calculations. Whenever they resist more than normal, we suspect there's a reason.

One insurance company refused to acknowledge our request to send us data. Knowing that our Client had a high probability of receiving a refund, we spent hours searching through our Client's dead storage files to reconstruct the premium calculation. Our effort uncovered that the insurance company had incorrectly applied the anniversary rating date rule. In addition, they used an incorrect experience modifier in their calculations. The resultant $5,433, overcharge represented a 12% refund in the cost of their coverage.

A CHARITABLE ACT

As a favor, we agreed to audit a charitable organization's workers' compensation policy, even though their premiums were well below our minimum assignment.

The insurance industry changed classifications applicable to charitable organizations, causing confusion in the industry. Consequently the insurer assigned an incorrect classification. Neither the agent nor the insurer caught the classification error, resulting in overcharged premiums. In addition to our securing a $3,000 refund on their $4,000 expired policy, our work set in motion correct procedures that have reduced all future workers' compensation premiums by 70%!

BALANCE DOESN'T ADD UP

A service firm started a secondary business, which has a lower workers' compensation rate than the main business. The business owner paid all employees through one payroll account, but under separate department codes. When the audit was completed, the insurance company used the "balance" method of determining chargeable wages. That is, they recorded gross wages, but should have deducted the clerical wages, officers' salaries, and payroll for the secondary business in order to determine the payroll. By adding the payroll for the secondary business back into the gross, they incorrectly inflated the payroll for the higher rated classification. They overcharged the Client by 37% of the policy premium. Neither the Client nor the broker noticed, until we uncovered the error.

CORRECTING A CLASSIFICATION MISMATCH

Workers' compensation class code wording can cause a false sense of security. Many times, we find a mismatch. That mismatch can only be discovered under close examination, and a comprehensive understanding of the actual business operations anticipated within each of the nearly 700 available class codes. While scrutinizing the class code assignments for one Client, we noted that the phraseology properly described the business, but the actual scope of what was expected when using that class code in fact did not relate to their business. When this happens, we rely on our knowledge of the scope of operations anticipated by other class codes, and fit the Client into the classification code that best describes the business "by analogy" instead of phraseology. Our work for this firm caused a $60,000 refund, and lowered their costs by 20% each future year. Sometimes what appears to be obvious, really isn't. If you are not sure your classification is correct, please call.

IMPROPER DESCRIPTION CAUSES OVERCHARGE

We just concluded five months of work to correct a classification error for a Client. Four different rating bureaus were involved so the project was more complicated than normal. One rating bureau was particularly late in releasing their ruling, which was different than we expected. When we questioned the rating bureau, the analysts refused to reopen the file to reconsider their ruling. We forced the issue . . . . and pointed out that their report describing our Client's business was incorrect. Working with the bureau Director, we discovered that contrary to procedure, the insurance carrier influenced the initial ruling. After all the accurate facts were assembled, the Director issued a corrected ruling authorizing the proper class code, which resulted in a reduction of over $100,000.

AN UPHILL BATTLE

Last year, we began what should have been a routine process. We were correcting a classification assignment error that had resulted in a Client being overcharged for their insurance for an eight year period. We ultimately received confirmation from the regulatory bureau that we were correct and that indeed a classification error had been made. We promptly notified the insurance company and requested a refund.

The insurance company responded by contending that the old class was correct "at the time" because, prior to our correction, they said the Client manufactured a different product . . . thus insisting their classification had been correct, and refused to refund the past premium overcharges. In fact, the business had not changed.

We were able to prove that our Client presently manufactured the same product that they had in the past, and finally got the insurance company to issue a refund of $20,604.

$1.5 MILLION LAWSUIT DISAPPEARS

AuditRate recently helped a Client save a lot of money in a non-traditional way. An insurance company had filed suit against the business to collect over $1,500,000 in back premiums owed on Retro Adjustments. The business' lawyers had heard about our reputation for getting things done, and hired us as an expert witness for the defense. We helped counsel prepare their defense by explaining the facts about unrealized future costs of claim malfeasance, and simplified the retro premium calculations (so everybody could understand).

The combined effort caused the insurance company to drop their demand for the $1,500,000.

CHANGING THE NAME CAN CHANGE THE GAME

Ownership changes can have a dramatic effect on the cost of your workers' compensation insurance. One case involved a wholesale distributor who broke off from their parent company. By applying a rule that went into effect four months after the ownership change, their insurance agent caused a debit modification to be applied, resulting in a substantial premium overcharge. By working with the appropriate parties, we recovered the total overcharge for our Client . . . $24,000!

CLERICAL ERRORS INCREASES MOD FACTOR

We found 3 unrelated errors for one manufacturer, in different years of their workers' compensation experience mod calculation:

1. Experience mods are calculated by relating payroll (not premium) to claims. In this case, the payroll for the governing classification was $1,783,865, but only $178,386 was reported - obviously, the last digit was omitted. This caused the experience mod for three years to be between 15 and 23 points too high. This produced an overpayment of over $38,000.

2. Surprisingly there was a similar error in the clerical classification for another period. While this has less of an impact due to the lower class rate, it still resulted in approximately $2,500 in refunds.

3. The current mod also contained an error. A claim of $19,000 was recorded, but the claim was for another policyholder of the insurance company, and was not from an employee of this manufacturer. Correcting this error produced a .05 mod reduction, or approximately $4,000 return premium.

The total refund -  $44,500

GIANT REFUND OBTAINED FROM STATE BUREAU

Normally, our refunds come from an insurance company. However, in several states workers compensation insurance must be purchased from the state ... private insurers are not allowed to provide insurance. We uncovered a substantial calculation error in one of the  "monopolistic" states. We were able to convince the state bureau to pay a six-figure refund to our Client! In addition, eliminating the error will save them over $100,000 per year for every year of their future operations! Insurance companies aren't the only ones who make mistakes.

RIGHT ANSWERS AREN'T ENOUGH

A manufacturer asked us if an insurance company could make certain changes on their workers' comp policy . . . . after the policy was in force. We advised them that what the insurance company was attempting to do was wrong. We gave them critical information that would allow them to "do their own insurance cost reduction work". They almost succeeded. Like we often say, it's easy to uncover the error . . . . it's difficult to actually get an insurance company to refund an overcharge.

After the manufacturer renewed coverage for another year with the same carrier, the insurance company audited the expired policy, and billed the firm $8,000 too much. The buyer questioned the agent, who questioned the insurance underwriter, who questioned their insurance company's home office experts. The insurer stated that their billing was correct. Further, as the payment was now past due . . . . unless they paid the audit immediately, their current policy would be cancelled. The insurance buyer paid the additional premium to stop the threatened cancellation. The insurance buyer called us back, contracted for us to fix the error, and the insurance company revised the audit to refund the $8,000 overcharge!

1 CORRECTED ERROR = 2 YEARS OVERCHARGES

The insurer was late developing the 1995/96 payroll audit. To avoid a penalty, they submitted the policy payroll estimates to the NCCI (National Council on Compensation Insurance). When the audit was finally complete, the corrected unit stat cards were filed reflecting the correct payrolls for the 1997 experience modification.

Unfortunately, the subsequent 1998 and 1999 experience modifications reverted back to using estimated payrolls, causing an erroneously high experience rating factor. We were able to correct this error, and obtain a refund of over $16,700 for our Client.