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Workers Comp Audits Change As Your Company Grows

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Company Growth = Workers Comp Audits Change

As your company grows the Work Comp  audits will change.Workers compensation audits for very small companies are usually self-audit situations. Each state has a minimum level of premium that requires the insurance carrier to do an on-site audit. 

Hands Symbolize Workers Comp Audits Change With Plant on top
123RF

One of the most common bases for mistakes on payroll (premium) audits is that a very small company and/or their agent will describe to the carrier what operations they perform in going about their daily tasks. As the company is so small, the agent or company owner is charged with making the initial determination. The classification codes can sometimes be wrong from the start.

The more common mistake is made when the company grows and the classification codes are just copied from policy to policy each year. I have seen where there should have been an additional seven classifications added to better describe some of the employees’ job functions.

The workers compensation payroll auditor will usually discover some of the errors and possibly reclassify some of the employees. However, the auditor is under pressure to perform as many audits weekly as possible. They may not have the time to review what each employee does on their job. I am not picking on premium auditors – it is just the nature of the business.

Picture Company Grows National Cement
Wikimedia – DFID – UK Department for International Development

Knowing what classifications a company should be under is sometimes a very arduous and complicated task. I have seen employers try to use their SIC codes when describing what they do on their Workers Comp insurance applications. The SIC and Workers Comp classification codes can have (and are usually) night and day differences.

This mistake and others are mentioned in a previous post on red flags with your Workers Comp policy. I will cover classification by analogy next time.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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