Returned Premium and
Lower Mod for Social Service Agency
Insured
The insured is a regional social services agency providing day habilitation,
vocational, residential, and evaluation services to approximately 400 disadvantaged
adults. With a payroll of $8,975,000 for 315 employees, they operate eight
day-habilitation facilities and 16 residential programs in which consumers
live independently, with employees visiting their residences daily to provide
needed services. The organization also operates a thrift store, cookie bakery
and a distribution enterprise. In 2004, the insured reported total revenues
of $13,405,468.
Situation
WorkComp program services consisted of a policy provided by an assigned
risk carrier and an annual visit by the insurance company’s auditor
and loss control representative. Their 2004 Experience Mod jumped to 1.85
from 1.55 and 1.58 the previous two years. When they received a renewal
bill from their carrier and a renewal policy from their agent, they had
no idea why their premium was so high. Management thought the system was
out of control and there was no way to control the increasing costs.
Assessment
A Certified WorkComp Advisor collected loss data from carriers for three
previous policy years. He compared the data to that found on the Experience
Mod worksheet and found errors in all three of them. In the first year,
seven errors were found, each consisting of closed claims with incorrect
loss amounts listed. In the second year, 27 errors were discovered; most
of these were closed claims with loss amounts listed as twice their actual
values. In the third year, the policy included one aggravated inequity claim
as being open for $15,877, when in fact it had closed a few days after the
valuation date for $944. Errors were not the only problem; the insured also
had no process in place to perform pre-employment physicals and had no means
to manage employee workloads to accommodate physical limitations.
Solution
In addition to addressing the 35 individual errors from the three previous
years with each of the appropriate carriers, the CWCA discussed with the
insured the claims, their causes and what may have been done to prevent
them and to better manage them. He impressed upon them the need for conditional
offers of employment and pre-employment medical exams so if an issue arose
with an employee they could accommodate his or her workload. At first, they
were unsure of the applicability, but accepted the plan after the CWCA discussed
the direct and indirect costs to the organization, the personal cost to
the employee and pointed to specific instances where a pre-employment exam
could have made a difference.
Result
The CWCA pursued corrections with the previous carriers. Corrections for
2000 reduced the Mod to 1.8. Corrections for the 2001 policy year and the
correction of the aggravated inequity in 2003 reached the bureau nearly
simultaneously and a 1.69 Mod was issued. In total, the client received
a returned premium of more than $24,000.
