Workers Comp Embedded Insurance Program To Other Policies
Can Workers Comp embedded insurance cause problems later?
When I was looking over the usual morning publications that I read for story ideas, I came across a great interview on embedded insurance from AM Best. Do you subscribe to their daily newsletter? If not, you may want to put it on your list. I watched a video on embedded insurance plans. I was not familiar with the definition.
I found a great article on embedded insurance here. I used to call it affinity selling. I could find nothing on workers comp embedded insurance programs. I thought I would add my comments.
Yes, I am slightly changing the definition to make Workers Comp an add-on to many micro and small business insurance policies offered by insurance agencies.
Definition of Embedded Insurance
The definition of embedded insurance is “when a non-insurance entity distributes an insurance product.” Two examples are:
- Buying travel insurance when you purchase an airline ticket online
- Extended warranty insurance
I have bought embedded insurance when traveling a few times. I had to file a claim once. The carrier reimbursed my travel expenses within 15 days due to being stranded internationally. During the pandemic, I bought travel insurance constantly.
Workers Comp Embedded Insurance on BOP Policies
BOP or business owners’ policy applications always contain a section on whether you want to add Workers Comp coverage to a BOP. A few states require Workers Comp coverage for almost any sized company. Even sole proprietors may have to provide coverage for themselves.
Ghost policies are not recommended as states have recognized this type of policy as possibly premium evasion if your company has employees.
Where The Problem Begins With Workers Comp Embedded Insurance
We see this problem occurring very often. If workers comp is sold as an extra coverage (embedded insurance) many times the premium may be very small.
We usually receive this type of inquiry once per week or more. The insured added Workers Comp to their insurance package – usually BOP- without paying attention to their class codes. The Workers Comp policy seems like a bargain until the premium audit occurs 30 – 60 days after the policy expiry.
What seemed to be a bargain, is now a $20,000+ bill – often for uninsured subcontractors. We then receive a call or email inquiring why the bill was so unexpectedly high.
Way To Avoid This Situation
Workers Comp may be offered to your company as a type of embedded insurance. Even though the BOP policies may be lengthy when other coverages are added, take the time to pull out your Workers Comp policy and at least review the Declarations Page. If the declarations page and class codes do not describe what you do, check with the agent that wrote you the policy.
Workers Comp embedded insurance may not be a popular term until you receive a final policy bill.
Bottom Line – make sure you know what you are buying when you obtain Workers Comp coverage.
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