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Some premium adjusters promise too much - some consultants encourage the falsification if risk levels on which workers' compensation premiums are based - Benefits Update - Brief Article

Nation's Business, Jan, 1998 by Stephen Blakely

Businesses that hire consultants to help lower their workers' compensation premiums may be inviting unwarranted expenses or legal trouble if they're not careful whom they hire.

So-called premium adjusters are independent consultants who are hired to review a company's job classifications, looking for inaccurate worker ratings by the insurer.

Workers' comp premiums vary according to each job's assigned level of risk. Thus, if a company's workers are placed in a risk category that's too high for the tasks performed, the company's premium for workers' comp coverage can be undeservedly high. (See "Costly Numbers In Workers' Comp," September 1997.)

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If a detailed review of a company's job classifications discloses risk ratings that appear too high, the premium adjuster negotiates with the workers' comp insurer for premium refunds. The adjuster may charge a percentage of any premium refunds obtained or may work on an hourly basis.

According to one premium adjuster, however, some consultants charge large fees at the outset while promising substantial premium refunds, or they encourage companies to inaccurately describe the nature or understate the risks of their jobs to achieve a premium reduction.

Deliberate falsification of the risk levels of jobs amounts to premium fraud, a serious insurance crime, says Edward J. Priz, president of Advanced Insurance Management in Riverside, Ill., and author of CompControl: The Secrets of Reducing Workers' Compensation Costs (Oasis Press, $19.95).

Priz offers these guidelines for businesses that use an outside firm to review their workers' comp premiums:

Never misrepresent the nature of your business or the duties of your employees. "No reputable consultant will be involved in such schemes," Priz says. Any consultant who suggests such action should be reported to state insurance officials, he adds.

Don't pay a big fee upfront based on a consultant's promise of premium refunds. The savings may never materialize. Most premium adjusters work on a contingent-fee basis, which means you pay only if and when a premium refund is awarded.

Ask for the consultant's findings in writing. Demand an explanation of the exact nature of the premium mistake and the corrective course of action. If you have any doubts, ask your insurance agent to review the consultant's report.

Obtain references and check them before hiring a premium adjuster.

The Coalition Against Insurance Fraud, an industry-supported group in Washington, D.C., confirms that there have been some -- though apparently few -- recent reports of adjuster fraud. Coalition spokesman Mike Diegle says his organization has been pushing for tougher state laws that would make it easier to prosecute third parties that "aid and abet" insurance fraud.

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Some premium adjusters promise too much - some consultants encourage the falsification if risk levels on which workers' compensation premiums are based - Benefits Update - Brief Article

Nation's Business, Jan, 1998 by Stephen Blakely

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