When it comes to workers' compensation insurance, small mistakes cost big money. Businesses across the country are paying too much for workers' compensation insurance for mistakes as simple as how their business is classified. Fortunately, there's something you can do about it.
A business's classification is related to the level of hazard that jobs in that category typically involve, in turn affecting insurance costs. The two keys to getting classification mistakes fixed are patience and attention to detail. Insurance company underwriters and auditors can do little for a policyholder who is long on indignation but short on detail. Put in writing exactly why you feel the classification used is wrong for your business. Make reference to the specific descriptions in the manuals that you feel support your case. And then be sure to follow up. It's generally a good idea to go through your agent, as most insurance companies prefer that approach.
Make sure you get their initial response in writing. Set up a file and document it carefully with every letter, fax and e-mail you receive on the subject. Keep a detailed record of all phone conversations as well, noting date, person you spoke with and what was said. If they commit to a deadline or timetable for action, don't hesitate to follow up when those deadlines arrive.
If your insurance company refuses to reconsider, you're not out of luck. If your company has already been inspected by a rating bureau, you can communicate with the bureau and point out the specific areas in the report you feel are inaccurate or incomplete. Work your way up through the rating bureau bureaucracy and find the individual most experienced and knowledgeable in classification matters. Then send a detailed written communication to this person.
If a rating bureau has not inspected your company, consider requesting an inspection. Many rating bureaus charge significant fees for this service, so negotiate for the insurance company to pay or--if they don't agree--for the "loser" to pay. Once the inspection is arranged, prepare carefully and make sure the inspector understands all the key points you want to make. If the results of your inspection aren't favorable, carefully review the inspection report and see if there are any inaccuracies or omissions. If there are, immediately send a written correction and then follow up to make sure it's taken into account.
If you're unsuccessful and still feel your argument has merit, every state has some kind of appeals mechanism that employers can use to get classification decisions reversed. Your state's department of insurance can explain the process for your state.
Once the classification is corrected, look into whether you're eligible for a refund from previous years' overcharges. Classification mistakes are one of the most common causes of overcharges in workers' compensation premiums--and fixing them is one of the best ways to get your premiums lowered.
Edward Priz has worked in the insurance industry since 1976 as an insurance agent, consultant and expert witness and has specialized in helping employers reduce the cost of workers' compensation insurance since 1983. He is the author of Ultimate Guide to Workers' Compensation Insurance.