There are so many instances of businesses overpaying for their workers compensation simply due inaccurate data between the parties involved. When it comes to workers compensation in Georgia, the parties involved in the premium determination are: the business (you), the insurance company, and the National Council on Compensation Insurance (NCCI). 

Most of the time there is a breakdown in sharing of incorrect data it amounts to the business paying more in workers compensation insurance premiums than they otherwise should. The data is usually related to claims data and occupation data. 

Claims Data- How It Impacts Your Workers Comp Premiums

The most common way that businesses end up paying more than they should for their workers comp is due to claims data being inaccurately reported. When workers comp claims arise, that data gets reported to NCCI. NCCI then uses the claims data to determine the experience modification factor (E-Mod) for the business. Once the E-Mod is generated, the insurance company applies the E-Mod to the premium for the business, which results in an increase in premium. 

What often happens is a claim will be opened and the insurance company will report what they expect to pay for that claim to NCCI, even if it hasn't closed out. If the claim closes out for less than what was anticipated by the insurance company, it often times does not get reported, which makes the E-Mod higher than it should be and leaves the business paying more in premium than they should. 

Something we recommend businesses to take advantage of is having their commercial insurance agent audit their experience mod. As a commercial insurance agent, we use software to audit E-Mods to ensure accuracy. It will also show the business the financial impact on each and every claim and allow them to walk through several "what-if" scenarios. It is worth noting that about 65% of the E-Mods being used are inaccurate, meaning there's a 65%+ chance your business is overpaying for workers compensation.

Occupation Data And Class Codes- How It Impacts Your Workers Comp Premiums

The second issue we frequently see that causes business to pay more than they should for their existing workers comp program is the use of incorrect class codes. Class codes are used to break down the different occupations within your organization based on how hazardous they are. This can somewhat depend on the industry you are in, but in many cases Georgia businesses can take advantage of using itemized class codes for their payroll.

For example, an auto repair and sales shop may have $500,000 in total payroll. $250,000 for technicians, $150,000 for sales persons, and $100,000 for clerical employees. The most hazardous and highest premium employees are going to be the technicians because they are much more likely to get injured while on the job. Instead of paying premium on $500,000 of payroll for auto repair, this business can pay $250,000 for auto repair technician payroll and then can use less hazardous class codes for the sales people and clerical workers, which would save them 35-40% on their workers comp premiums. 

So What Can Your Business Do To Find Out If You Are Overpaying?

The simple answer is to reach out to us and schedule a free consultation. If there is money being left on the table, we can work with you to get that adjusted and help your business recover overpayment from the past couple of years. Our CompCostControl Program is designed to audit your company's workers compensation program to ensure you're not overpaying. Click below if you'd like to schedule a consultation to see what we can do for your company!

So your company just renewed your commercial insurance for another term. Then, out of no where, you receive an invoice for additional premiums. Why? What is this for, you may ask? That is what we will dive into in this article:

Let's start with the question: How are Workers Compensation premiums calculated?

Workers Compensation Insurance, along with some General Liability policies are rated at the beginning of the policy period based on certain factors. With Workers Comp, it is rated based off of your payroll 100% of the time. With General Liability, it can be rated based off of payroll, revenue, building square footage, or other factors. For now, let's focus on workers comp insurance.

At the beginning of the policy period, your policy will be issued based on the estimated payroll for your business. Essentially, whatever you tell the insurance company you expect for payroll figures over the next 12 months is what will determine your estimated premium.

Consider 2 companies in the exact same industry. Company A has $750,000 of payroll expenses. Company B has $200,000 of payroll expenses. Due to the fact that the insurance company is at risk for paying out more in workers comp claims to Company A, Company A will have to pay more in workers comp premiums. 

This gets broken down even further by class code. For instance, a worker that is a window washer for high-rise sky scrapers is more likely to get hurt or killed while on the job versus a clerical worker that sits behind a desk all day. Since it is more likely that the person with a dangerous job will get hurt, the insurance company has to charge more to cover that employee. 

So How Does The Insurance Company Know That The Figures Provided At The Beginning Of The Policy Period Are Accurate?

Through a premium and payroll audit. At the end of the policy term, workers comp insurance carriers will perform an audit to ensure that the right amount of premium was collected. For small businesses, insurance companies may just send forms for the owner to complete and request a copy of payroll tax information. For middle to large companies, there is usually more paper works and documentation involved. After the audit is complete, the insurance company will either owe money back to your company because you were over-charged throughout the policy term. Or this could mean that your business owes money to the insurance company because you were under-paying throughout the policy term. 

What Specifically Causes A Business To Owe More Money Back To The Insurance Company?

There's usually a few reasons why a business will owe additional premium to the insurance company:

1. Payroll was under reported: Company B estimated $200,000 of payroll expenses. After the audit, it was discovered that Company B actually incurred $500,000 in payroll expenses
2. Class codes were incorrect: Company A estimated $750,000 in payroll expenses. $500,000 was for clerical office workers (very safe occupation) and $250,000 was for window washers (very dangerous occupation). After the audit it was determined that $750,000 was paid in total payroll. HOWEVER, $700,000 was paid to window washers and only $50,000 to clerical office employees. 
3. Uninsured Subcontractors: In the state of Georgia, subcontractors or 1099 independent contractors that perform services for your company are going to be covered by your business' workers comp policy while performing work for your company IF they do not have their own policy. This is why it is VERY important to collect certificates from subcontractors. If you can show your workers compensation carrier that the subcontractors you hired were insured on their own policy, then your company won't have to pay additional premiums. 

So What Can Your Company Do To Make Sure You Aren't Stuck With A Massive Bill At The End Of The Policy Term?

The number 1 things that companies can do is get on a Pay As You Go workers comp billing plan. With Pay As You Go billing, your company is audited in real-time, meaning whatever you pay in payroll this month is appropriately charged to the company next month. You can either do a self-audit each month where someone from the company logs into an online portal with the insurance company and enters in payroll information or you can set it up where your payroll company reports it directly to the insurance carrier. In both of these instances, it is still important that employees are classified correctly and that you're collecting certificates from subcontractors. 

What If My Workers Comp Insurance Company Doesn't Offer Pay As You Go?

Some carriers are still behind with the times. If you're company doesn't offer this billing option, I would recommend checking in with your commercial insurance agent every couple of months to update on changes with payroll. 

What Happens If My Company Doesn't Complete The Audit?

If your company doesn't complete the audit then you will be charged with what is called a non-compliance audit. Essentially, the insurance company will charge you 2-3 times the estimated premium as additional premium owed. 

How Can The Roberts Insurance Group Help?

For starters, we are very well-versed in workers compensation insurance and specialize in helping companies get set-up with the right plan from the start. At The Roberts Insurance Group, we have developed our CompCostControl Program that is specifically designed to help companies recoup money from past audits, among other things. We will also provide audit support on current and past audits. We are often are able to review past audits for new clients to find additional money that is owed back to you. 

Give us a call at (678) 250-8133 or click below to see how we can help with your company's workers compensation program.