A Practical Guide to Workers’ Compensation

Insurance agents and brokers are charged with many duties on behalf of their clients. One often neglected duty is working with insureds to prepare them for the annual workers’ compensation and general liability audits.

Many agents mistakenly assume insureds know what to expect and how to prepare for this yearly event. In fact, the opposite may be true. Insureds, even the most sophisticated and experienced, must be coached through the process to some extent every year. Having experienced the audit process does not make the insured an expert. Because 12 months passes between meetings with the auditor, clients tend to forget the process.

Mitch Dunford, CEO of Wells Publishing, asked MyNewMarkets.com’s Associate Editor Chris Boggs in a recent podcast interview to list and discuss the “rules” of preparing clients for a premium audit. Boggs relates the “ABCs” of premium audits as found in his new book, “The Insurance Professional’s Practical Guide to Workers’ Compensation: From History through Audit.” Following is an excerpt from the podcast interview. To listen to the full podcast, visit: https://www.insurancejournal.tv.

Mitch Dunford: In your new book, I found the first chapter very interesting. You talked about the history of workers’ comp all the way back to pirates. Can you talk about that?
Chris Boggs: Sure. It was actually quite an interesting study, to trace this history as to how workers’ comp got to the United States and how it evolved over time. I was watching the History Channel and in one piece about pirates, it made a comment just in passing that the pirates actually had a system of workers’ compensation. I thought, “That’s pretty interesting. Let’s research this and see if this is true.”

What I found out is that they (pirates) did, in fact, have a system like we think of as workers’ comp. If a crew member was injured while attacking somebody else’s boat, trying to take their stuff from them, the crew felt obligated because the person was helping the crew and doing the work of a pirate. There was the caveat, you had to live; there was no death benefit for pirates. And if the member was able, he was allowed to stay on the ship and perform lighter duties.

Dunford: That’s interesting. In the last chapter of your book, you list five audit guidelines or rules. You call them the ABCs of premium audits. What are the five guidelines agents should use to prepare their clients for their audits?
Boggs: In preparation for any audit, the agent needs to explain to the insured what’s coming. The first rule — the “A” of the ABCs — is to “always” be there. The person who is intimately knowledgeable about the company’s finances and the company itself must be there to answer questions. If the most qualified person is not there, the auditor is going to have to make some assumptions. And these assumptions are rarely to the insured’s advantage.

The “B” is “be prepared.” Have all the information the auditor needs. Basically, you want him in and out as fast as possible. Don’t make him (the auditor) wait, and don’t make him uncomfortable (prepare a place for him to work). Have the payroll records, employee records, cash disbursement records and certificates of insurance if the insured has subcontracted any work. On the construction side, if the insured has participated in any wrap-ups or OCIPs (Owner Controlled Insurance Programs), that information should be provided.

The “C” in the ABCs is to always get a “copy” of the auditor’s work papers before he or she leaves. Before the auditor walks out the door, get a copy of his or her work papers. Because that’s the point at which the insured can see what his (the auditor’s) train of thought is, the information he has and hopefully be able to anticipate any problems.

It is much better to get audit problems ironed out before the audit gets chiseled in stone. And it’s much more difficult to deal with after it’s already been processed and billed. With the work papers, these problems can hopefully be cut off.

“D” stands for “don’t” volunteer more information than asked. It sounds like you’re trying to be secretive, but basically, don’t go overboard. I know insureds are proud of their company. Everybody’s proud of their company, but don’t give them (auditors) reason to investigate longer than necessary. It’s like when OSHA shows up. In North Carolina, OSHA has to tell you what they want to see. The recommendation that all consultants give is take them (the OSHA representative) around the building to what they asked to see. Don’t take them through the building, because if they go through the building, they might see some other problems. But if they go around the building to what they asked to see, they won’t see anything else. So, don’t volunteer more than what is asked.

And the “E” is to know the “exceptions” to the single enterprise rule and be able to apply them to the client’s advantage.

Dunford: What is the single enterprise rule?
Boggs: Basically, the single enterprise rule is an attempt to meet the goal of the workers’ compensation classification system, which is to assign one code to the entire business operation. This is part of and related to the governing classification rule. There are, however, four exceptions to the single enterprise rule the insured must know about and be able to apply. The exceptions are: standard exception classifications, the interchange of labor rule, general exclusion classifications and the multiple enterprise rule.

Dunford: If someone wanted a copy of your book, “The Insurance Professional’s Practical Guide to Workers’ Compensation: From History through Audit,” where could they order it?
Boggs: You can get it from www.insurancejournal.com and at http://ijmag.com/wcbook.

Buying the Book

The “The Insurance Professional’s Practical Guide to Workers’ Compensation” by MyNewMarkets.com’s Associate Editor Chris Boggs addresses in clear, jargon-free English many of the concepts, policies and practices in workers’ compensation that brokers, risk advisors and corporate risk managers need to know. Boggs explains to non-lawyers the legal aspects of workers’ compensation, freeing the reader from having to wade through dense legal and regulatory treatises. The book can be purchased as a digital download for $49.95 or as a paperback book for $55 by visiting: http://ijmag.com/wcbook.

Podcast

To listen to the full podcast of this interview, visit: https://www.insurancejournal.tv/videos/2495/