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Did You Know You
Could Get A Substantial Refund on Your Worker’s Compensation Premiums?
“The answer is
Yes,” says James Hamilton, CEO of HFF Capital, a worker’s compensation
consultant. “We have recouped
thousands of dollars for our clients.”
In our work as
Worker’s Compensation premium reduction consultants, we have found that
approximately 72-76% of all employers in New York State have overpaid on
their premium in the past three years. In some industries such as
construction, staffing, social services, and not-for-profits, the
percentage can be as high as 80%.
And most don’t
even know they have a refund coming!
Would You Like to Know
If You Are Entitled to a Refund?
It’s not hard if you
know the procedures: know what to look for and how to apply. Here are some of
the more common reasons why an employer might overpay their premium:
- High Experience Modification
Factor. The “mod” acts as a sort of yardstick, indicating whether your
claims experience is similar to companies in or close to your
industry. One factor that can lead to inflated mods is a claim that
has been closed by the carrier, but was not reported to the State Rating
Bureau. As a former tort attorney working for insurance carriers I can
tell you that a closed claim on the carrier’s books that remains open
with the Rating Bureau can easily balloon your premium.
- Payroll Errors. In New York, the
New York State Rating Bureau provides the formula by which ‘payroll’
is defined for purposes of calculating worker’s comp premiums. For
much of the United States, it is the National Council on Compensation
Insurance (NCCI). (Payroll isn’t defined solely as money, but also can
include such things as stock bonuses or commission draws.) No matter
where you live there are 13 deductions that can be excluded from
payroll for the purposes of estimating the premium. This often leads
to payroll amounts being overstated inflating the premium the employer
pays.
- Wrong Classification. Similar
types of employers are grouped together by their common job exposures.
The more hazardous a job duty is, the higher the class code rate and
thus the higher the premium. It is here that the company can save
literally thousands of dollars by correctly re-classifying these class
codes. The problem is that the system of classifications is a complex
one, and for someone not well-versed in the classification of these
class codes, an error compounding a misclassification can often be
made.
Keep in mind that workers compensation insurance is the
only type of insurance over which you have some control over the premium
you pay. This is a powerful attribute that too often business owners and
employers miss. This means that, unlike other forms of insurance, the
employer and its employees have great leverage over the amount of premium
they will pay. The same cannot be said of other lines of insurance, such as
health, homeowners or Errors & Omissions.
Thousands in Savings
It is not unheard of for carriers to add an additional
25% to estimated payroll figures when a business fails to comply during the
audit process. This is why it behooves you to have some understanding of
workers comp class codes, subcontractor payments, payroll prior to any
audit and to have someone knowledgeable about the business sit side-by-side
with the auditor. The results can be thousands of dollars of savings that
can be better used on the company’s bottom line.
James Hamilton
CEO, HFF Capital
Click here to request a complimentary consultation to see if you are entitled to a refund.
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