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Workers Comp Audits

Here is how to best prepare for your businesses for a workers compensation audit.

Each year all businesses must go through a workers compensation audit process. If you are like most small business owners, this is not one of your favorite parts of owning a business. The process can be long and tedious, but the more prepared you are for this process, the more quick and more smooth the process will be. Consulting with your independent insurance agent can help you prepare for the process and make sure the audit is done well the first time through the process. Here are 7 ways to ensure this process goes as painless as possible.

Communicate with your agent.

Open communication with your insurance agent is essential to a successful workers’ compensation audit. This is a reason why it is important to consider an independent insurance agent. An independent agent is not as closely associated to the insurance carrier. They can help you prepare for the audit and negotiate on your behalf if anything does not go in your favor. Open communication throughout your relationship with your insurance agent is essential to a satisfied experience during your small businesses workers comp audit.

Have paperwork prepared in advance

Having all necessary paperwork prepared in advance of your audit will make the process move as smooth as it possibly can. This includes any and all payroll and employee records. Job descriptions need to be included for each employee and their annual weeks, days and hours worked. The more detailed the better.

Payment and cash disbursement records,

Throughout the year it is important to keep a record of all payments and cash disbursement. Not having these available and organized is a good reason to have the auditor dig a little deeper during your businesses workers compensation audit. The more open, honest and organized you are throughout the entire audit process the more smooth the process will be.

Certificates of Insurance

Make sure to keep a detailed record of all needed certificates of insurance for any and all sub-contractors or independent contractors your business used. The primary reason for providing these documents is that if you do not, these contractors will be listed as employees and it can substantially raise what you pay in premium.

Experience Modification Worksheet

The experience modification worksheet is a document that is published annually by the rating bureau in your state. It covers the loss history for your business during the most recent three-year period, not including the most recent year. The most recent year is not included due to overlap from some claims not being closed. If you have had a large claims or a large amount of minor claims during any year it is important to have this worksheet available in order to show the true loss history of your business.

Make yourself available for the exit interview

After a typical workers’ compensation audit there is an exit interview at some time. It usually lasts several hours and is a way for the auditor to ensure they have all the necessary information to accurately audit your business. The more up-front you are with the auditor the more smooth the process will be.

Respond promptly to auditor follow-up questions

There will more than likely be questions you do not have the answer to. The more quick and thorough you respond to these questions the more likely the auditor is to work with you to quickly finish the audit process. The time period after the audit normally takes two to three weeks. There may be additional questions that need clarification and this may be a frustrating part of the process. The more accurate the audit is the better it is for your company. Your agent can help you with any of these questions if you are having a trouble finding the exact information to satisfy the auditor. It is also important to keep in mind that for security purposes, the auditor does not keep your payroll records. You very likely will be asked to provide additional information or records that you have already provided. No this going in to the audit and it can save you a lot of heart ache during the process.

An accurate workers compensation audit is in your best interest, moreso than a fast audit. This process is frustrating even during a good audit. It will take time away from your normal work, but it is within your best interest to ensure your audit is fair and accurate. Keep a positive attitude and consult your independent insurance agent in order to ensure your audit process goes as smoothly as possible.

Business Interruption Insurance

Business Interruption Insurance is the key when disaster strikes your business.

Business Interruption Insurance is the key to protect your business when disaster strikes.

Having good commercial insurance is essential to the long term stability of your business. It is a product that is necessary for you business, but a product you hope you never have to use. When there is a disaster that strikes your business, the quality of your coverage can mean the difference between a bump in the road and the end of your business. One key policy to help your business whether the storm when a disaster strikes is business interruption insurance.

According to the Insurance Information Institute, “Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt”.

This policy is normally offered as part of a Business Owners’ Package, but not always. It is important to confirm with your agent if this is included in your package. If it is not they will more than likely bring it to your attention as an add-on. It is a policy to strongly consider for your business. This business can help you pay necessary bills, retain key employees and may just be the difference between success and failure when a claim occurs.

In most states general liability and workers compensation insurance is required by law, but those are the bare minimum coverages any business should secure. Most businesses need several additional coverages to properly protect the organization. If you own property or vehicles their is a need for commercial property and auto coverage. If you own specialized equipment there may be a need for inland marine coverage. The one frequently forgotten coverage is business interruption coverage. Many small business owners fail to anticipate how they will pay their bills in the event a claim causes their business to be closed for a period of time. When this occurs the bills keep coming and payroll has to be met. If you are a cash strapped company, failing to secure this coverage may cause the ultimate failure of your business.

Communication is key!!!

Communication is key to limiting the workers compensation cost when you have an injured employee.

Communication is key when you have an injured employee.

Unless you have been living under a rock for the past decade or two, you probably realize that healthcare in America is a bit complicated. Add in an additional bureaucracy in the workers compensation system and the process can become down right frustrating for your injured worker to get the benefits they deserve. Dealing with this while also dealing with an injury is not exactly what your employee wants to be dealing with while trying to recover from an injury at work. Communicating with your employee throughout the entire workers compensation process is crucial to getting the worker the benefits the deserve, limiting the cost to your business and to getting the worker back on the job as soon as possible.

Communication should start as soon as the employee informs you there has been an injury. Who ever is the manager on duty when this occurs should inform the injured employee that the business is on their side and wants to see them get the care and benefits they deserve. Also the manager should let them know that the process to get your medical care paid for by the workers compensation system is a tad different than going to their local doctor. It adds a layer of bureaucracy to the situation, but the more likely you are to let them know you are there to help and then follow through with that message, the more likely the injured employee is to trust your business and eventually return to full time employment.

Communicating with not only the injured worker, but with the carrier is crucial as well. It is also important to keep your agent in the loop, but the carrier is the business that is equipped and responsible for helping you through this process. The main thing they can help you with is directing you to the proper facilities that are equipped to handle the workers compensation process. Speaking with the carrier about this and relaying the message to the injured employee is crucial to the ultimate success of your business.

Humans are creatures of habit. When people come to work they tend to create a habit related to that process. The longer they stay away from work, the more likely they are to develop new habits. When this occurs and the longer it occurs, the less likely the injured worker is to return to full time employment. This is when a claim can turn in to an extremely large cost to your insurance carrier and will be a part of your businesses loss cost ratio. The loss cost ratio is one of a few main factors carriers use to determine whether they are going to offer you coverage and how much to charge your business for premium. limiting the severity of any claim is crucial to keeping this ratio low.

5 Ways to Save $$$ on commercial insurance

5 Ways to save on Commercial Insurance

Partner with an independent insurance agent.

The first and foremost way to save money when you are purchasing commercial insurance for your small business is to partner with an independent insurance agent. Independent agents have the ability to shop your policy around to a number of carriers who are actively quoting policies in your industry and classification code. Carriers appetites for particular coverages and class codes can vary dramatically from carrier to carrier. If you use an agency who partners with only one carrier or a select few, you are putting your business at the mercy of those few carriers. If you are in a high risk classification code it may result in you only have the choice of one carrier. Independent agents can prevent this policy by shopping your policy around so you don’t have to.

Consider bundling your coverages

Carriers offer the ability to bundle policies in the form of a Business Owners Package (BOP) or Commercial Package Policy (CPP). The carriers do this as a way to save money for small businesses and the carrier benefits by securing more commercial insurance coverages from the small business owner. This benefits the small business community in many ways. First, it saves on premium because carriers are more willing to give a credit or discount if they know they are collecting on several policies. Also, and possibly more important, it prevents gaps in coverage. If a business owner purchases several policies from a number of carriers their may be a grey area in between the two policies that causes the incident to not be covered by the policies. Even if the occurrence is covered it usually takes a longer amount of time to get a pay out because the two carriers debate who is actually liable for the claim.

Set up a Safety Program

Safety Programs are a great way to limit your commercial insurance cost without a lot of time or effort from your business. Safety Programs can help you get coverage if you are in a hi-risk industry that many carriers are hesitant to quote coverage. It can also help you prevent a carrier from raising your rates due to a large or frequent claims in one term. On top of saving money on insurance premium, safety programs help your workforce stay healthy and productive which is good for your productivity.

Request a policy review.

A policy review can be asked for at any time on all commercial insurance policies. Periodically it is important to do this for a few reasons. One the review may identify you are in the incorrect classification code that is costing you unnecessary premium. This is especially important if you change something about the operations of your business. A great example of this would be if you are a landscaping company that has decided to add snow removal services to your business. Most insurance agents will exclude this part of the policy unless you specifically tell them you do snow removal. A policy review can either prevent an uncovered loss or lower what you pay in premium throughout the year.

Ask for available credits and debits.

Insurance agents interact with a lot of customers throughout a typical business day. These customers are usually from diverse backgrounds and they each have their own priorities when shopping for commercial insurance. Some just want to get the process over quickly so they can get back to running their business. Other business owners want to make sure they have their business insured to the fullest capabilities possible. Other business owners do not mind if it takes them an entire business day if they can save 5-10% on premium. Expressing your priorities to your agent is important to help them serve your needs. Additional credits or debits may be available for your business, you may just have to ask.

Illinois Contractor Surety Bonds

As a contractor in the state of Illinois, you will most likely run into a few, if not several, Surety Bond requirements. This should not worry you. While Surety Bonds can be a confusing line of insurance, for Illinois Contractors it can be quite a straightforward process. Many city and county municipalities will require the Surety Bond in order for you to obtain a license or permit to do work in that specific city or county. This means that you could possibly run into multiple cities or counties that have this as a requirement. One might think that you just buy one Surety Bond and you can use it for all of them right? Unfortunately that is not the case, as the Bonds are specific to each municipality that requires them, so the Bond you bought for The Village of Forest Park, will not be accepted by the City of North Chicago. When this happens, you should not worry too much. Even though for most contractors there is not a statewide Contractors Surety Bond, the Bonds for the municipalities are generally very inexpensive.

That takes us into the meat and potatoes of what everyone wants to know, how much will this cost me? As stated above they are usually very affordable, a policy will typically run around $50 to $125 for a one-year term. They generally do not require a credit check like other Surety Bonds, this is commonly referred to as “freely written,” meaning it does not go through underwriting. If you plan on doing work in a specific city/county for more than one year, you can usually purchase the Bond on a multiple year term and you will see some cost savings for extending the term.

These bonds can be taken care of over the phone in less than a ten minute conversation. You will just want to make sure you have the basic company information such as legal business name, address and contact information. Accuracy of the company information on your Bond is very important, if you do not match the name exactly how you filed your business name legally and how you are applying for the license/permit it could be denied by the municipality. The bonds are usually emailed and the electronic copy can be utilized to provide documentation to the municipality, but some do require original documentation. I always recommend asking how they would like you to file the Surety Bond to ensure there will not be any unexpected delays.

If you have an Illinois Contractors Surety Bond requirement or if you have questions, about Bonds feel free to call our agency and we will be happy to assist you with your Bonding needs.