Canceling Your Policy Right After Renewal Bad Choice
Will canceling your policy post-renewal due to a premium audit cost your company $$$?
We receive this question at least once per week. This is an almost verbatim question from two weeks ago with editing for length.
Question – “We just renewed our Workers Compensation policy. We do not agree with our (premium audit or policy terms). Our company wants to cancel our renewal policy and move on to another carrier. Can we do this? Is there any penalty for moving our business to another carrier?”
Answer – Without looking over the information, canceling a just renewed Workers Compensation policy may not be the best choice. Employers sometimes want to end the relationship with their carrier regardless of cost. This may lead you to the “penny-wise and pound foolish” adage.
The main economic burden that will be placed on your company is the Godzilla-like short rate penalty. The short rate penalty is a rating bureau approved penalty that will be assessed on an employer that switches coverage before renewal. The penalty can be significant early in the policy. There are a few strategies to avoid having to switch before the next renewal or your company may not switch even at the next renewal.
Obtain the policy from your agent at least a few weeks before renewal. Read through the policy very carefully. Read through your expiring policy. Discuss any concerns with your agent at least two weeks before renewal. If your company does not like the policy quoted, ask for another quote.
Prepare for your premium audit by providing a knowledgeable person to talk with the premium auditor. This person should have organized records with all data that the premium auditor will ask for in their letter to you.
You have the right to dispute the current audit or a limited number of past premium audits. Exercise this right cautiously. Saying that “we are just paying too much premium $$ without backup information will likely alienate your carrier and agent.
There are many previous articles in this blog that cover the premium dispute process. Feel free to print them out for your use. Use the search box on the right side to find information on premium audit disputes.
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