The Problem
A social services organization that serves under privileged and troubled youth received the results of their workers compensation audit from their previous broker / carrier. The audit asked for an additional premium of $26,000 and the carrier was calling daily for collection. As part of our standard service, KMRD utilized our "Audit Review Workflow" to review the audit for accuracy and determined the following:
- The original policy was issued including a 10% Scheduled Credit and the previous year's experience mod of 2.204.
- However, the audit utilized a Scheduled Debit of 10% and the final experience mod of 1.250. The carrier shifted the rating structure by 20% to offset the impact of the reduction in premium as a result of improved loss results. This change did not seem on the surface to be fair. Shouldn't the customer get the benefit of improved loss experience in the form of reduced premiums?
This change in the rating structure resulted in an additional premium request. Had the change not occurred, the carrier would have owed the client a return premium of $72,000, a $98,000 swing. Every dollar was important to keep this client's mission alive.
Solution
KMRD's initial letter to the carrier identifying what seemed to be a simple clerical mistake did not result in a favorable response. Rolling up our sleeves, we combed through our client's files to determine why this adjustment was made. The results were both revealing and disturbing:
- No mention of a pending adjustment in any of the proposal documents.
- A letter from their former broker forwarding an endorsement making the rating change mid-term. The letter provided no explanation on the financial impact of the change.
- A copy of an "off the shelf" memo confirming coverage was bound from the carrier that included a standard stipulation that the policy's premium will be adjusted when the final variables were promulgated. This language was favorable to our argument that the adjustment was not appropriate...
Results
KMRD presented our findings to the carrier as a "consultant" on behalf of our client. The paragraph on page 3 of the "off the shelf" memo was not disputable. The carrier collections department stopped calling our client and KMRD proceeded to "follow up regularly for a check from the carrier" in the amount of $72,645. The check arrived and assisted in their ability to enhance their mission. This win occurred over Thanksgiving and was rewarding on many levels.
The following entry was added to KMRD's Hall of Fame:
"I would like to thank you and your Team for the work that was done which allowed us to recapture the overpayment. Your diligence and follow through was the sole reason that we were able to appeal the audit and accept the decision that resulted in our favor"
If you would like to be part of another success story, email us at contactus@kmrdpartners.com
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