Canceling Your Policy Right After Renewal Or Premium Audit Costly

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Canceling Your Policy Right After Renewal Bad Choice

Will canceling your policy post-renewal due to a premium audit cost your company $$$?

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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.

Graphics of Canceling Your Policy Like Godzilla Pictures
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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.

©J&L Risk Management Inc Copyright Notice

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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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