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AuditRate® – The no-cost way to put an end to insurance premium overpayments.

Industry: Construction

• Industry: Construction
• Policy: Workers' Comp
• Company Size: Small
• Errors Found: MOD Score
• Refund: $180,000

Company: A Chicago area plumbing contractor with approximately 30 employees servicing commercial Clients throughout the Northwest Suburbs. The company approached AuditRate to help them assess the quality of their workers’ comp coverages and the accuracy of their premiums.

Findings: As we do with each review, our AuditRate Experts conducted a thorough analysis of the 1) classifications, 2) payroll data and 3) MOD score (a multiplier applied to the premium based on passed loss experience).

While everything was in order with the classifications and payroll components of their policy, the AuditRate Team found a clerical error in the loss history that had been missed for three years by the carrier, broker and Client.

Impact: This error—a duplicate loss claim—pushed the insured’s MOD score to 1.01 for the three years following the incidence of the claim. In addition to the higher premiums, the higher MOD also disqualified the company from contractor credits (which require a MOD of 1.0 or lower) thereby compounding the error. In fact, the insured’s premiums were 25-30% higher as a result. The AuditRate Team worked with the carrier to remove the duplicate claim, recalculate the MOD score, revise the premiums and secure the appropriate contractor credits moving forward. The Team then worked to secure a refund of $180,000 to recoup the prior three years of premium overpayments and the missed credits.

Industry: Professional Services

• Industry: Professional Services
• Company Size: Medium
• Policy: General Liability
• Errors Found: Classification Code
• Savings: 35% reduction in annual premium expense

Company: A medium-sized Chicago high-tech service company approached AuditRate to identify potential for cost savings on their general liability insurance premium.

Findings: After a thorough review, the AuditRate Experts noticed the company was improperly classified as a manufacturer/processor on their general liability policy, when in reality they provided professional services to manufacturers.

Impact: The AuditRate Team petitioned the carrier to change their classification code to correctly classify the much less-risky nature of their business.

The incorrect rating caused them to pay $3.24 per $1,000 of sales revenue for this coverage. We corrected the interpretation of the underwriter and lowered the rate to $2.10/$1000 of sales revenue—a 35% reduction.


• Industry: Professional Services
• Company Size: Medium
• Policy: Workers’ Comp
• Errors Found: Payroll
• Savings: 37% reduction in annual premiums

Company: After starting a smaller, less-risky secondary professional services business, this medium-sized Chicago firm contacted Alper Services to review their workers’ comp coverage and rates.

Findings: The AuditRate Team discovered an error in payroll classifications—the business owner paid employees of both businesses through one payroll account, but under separate department codes. Rather than separate out the payroll expense for the two businesses and assess them separately (one at a higher-rated classification, and the other at the lower-rated classification), the insurance company used the "balance" method of determining chargeable wages. That is, they recorded gross wages, rather than deducting the secondary business’s clerical wages, officers' salaries, and payroll from the total payroll. By keeping the payroll for the secondary business in the gross, they incorrectly inflated the payroll for the higher-rated classification.

Impact: This resulted in a 37% overcharge in the insured’s workers’ comp policy premiums. Neither the Client nor their broker noticed, until we uncovered the error and petitioned the carrier to adjust the premiums downward.

Industry: Distribution/Logistics

• Industry: Distribution/Logistics
• Company Size: Large
• Policy: General Liability
• Errors Found: Clerical
• Refund: $845,000

Company: This 150-vehicle fleet trucking firm approached Alper as part of a board-mandated review of coverages and premium expenses for their vast operation.

Findings: Our AuditRate review uncovered issues with the broker falsifying underlying accounting statements and altering contracts that resulted in $845,000 in overcharges.

Impact: After the AuditRate Team corrected these underlying issues, and their policies, the carrier issued a full refund of the $845,000 in overpayments within three weeks.


• Industry: Distribution/Logistics
• Employee Count: Large
• Policy: Workers’ Comp
• Errors Found: Classification Code
• Refund: $1.3 Million
• Savings: 50% in annual premiums

Company: The Chicago-based, North American operations of a European-based supply chain and logistics technology company approached AuditRate to ensure their coverages and rates were in line.

Findings: During AuditRate‘s standard practice of reviewing their U.S. operations, we found that while the European parent company engaged in risky high-tech manufacturing, the US operations business model focused on design, sales and service. The insurance company, however, had rated the U.S. operations based upon the parent company’s much-riskier business.

Impact: AuditRate approached the insurer asking them to correctly classify the U.S. operations and refund in excess of $1.3 million dollars in premium overcharges. After only a few meetings, we were able to convince the carrier that our position was correct, and secured a refund of $1.3 million—an AuditRate record-high rebate.


• Industry: Distribution/Logistics
• Employee Count: Small
• Policy: Workers’ Comp
• Errors Found: Classification Code
• Refund: $27,000

Company: A wholesale food distributor based in suburban Chicago.

Findings: AuditRate secured a windfall when we uncovered a workers' comp classification error in this business’s workers’ comp classification. In 1997, the National Council on Compensation Insurance changed the classification for this type of distributor to better reflect the nature of their business, but the firm's policies were never amended to reflect the lower-rated classification.

Impact: We secured a refund of $27,000 for prior-year overpayments.


• Industry: Distribution/Logistics
• Employee Count: Small
• Policy: General Liability
• Errors Found: Clerical
• Savings: $15,000/year

Company: This small, Northwest Indiana warehousing/storage business was looking for ways to reduce unnecessary overhead and improve profitability.

Findings: Upon reviewing the general liability premium calculation for this logistics business, AuditRate discovered the insurance company rating department incorrectly placed a decimal point in their rate calculation, resulting in a $9,000 overcharge. In rating the renewal, the carrier uncovered their error, partially reduced the rate on the renewal, but did not reduce the rate on the expiring policy. This overcharge continued because the broker and the Client only compared overall prices from one year to the next.

Impact: We exposed the rating error to the insurance company, and the company’s premiums were further reduced, with a total refund of $15,000.

Industry: Manufacturing

• Industry: Manufacturing
• Company Size: Medium
• Policy: Workers’ Comp
• Errors Found: Classification Code & Payroll
• Savings: $10,700/year

Company: This medium-sized manufacturer was looking to free up working capital to invest in expansion into a new market. They contacted AuditRate in the hopes of finding savings in their workers’ comp premiums.

Findings: During our review, AuditRate Experts found a very common issue inherent with how the company managed their payroll data. As is the case with most companies, they grouped employees with varying job duties into departments within their payroll records, versus grouping employees based on job duties. ln this case, the insurance company and broker failed to ask if everyone in each department performed the same tasks, and therefore were exposed to the same risks. The reality is that the tasks within departments ranged widely by employee. This misclassification resulted in $10,700 in annual overcharges.

Impact: Once we notified the insurance company of the error, they revised the audit and lowered the total premium by $10,700.


• Industry: Manufacturing
• Company Size: Medium
• Policy: Workers’ Comp
• Errors Found: Classification Code
• Refund: $60,000

Company: After more than five years with their prior broker, this medium-sized Chicago consumer products manufacturer contacted Alper for a second opinion on their workers’ comp program.

Findings: Drawing upon their extensive working knowledge of the nearly 700 workers’ comp policy class codes, coupled with insights gathered from a thorough audit of the insured’s business, the AuditRate Team found a discrepancy between the assigned class code and the reality of their business. This misclassification was at a higher rate and contributed to multiple years of premium overpayments.

Impact: Our Experts identified a more appropriate code, succeeded in having the carrier apply the correct code, and recalculated premiums. This resulted in a $60,000 refund as well as a 20% reduction in subsequent-year premiums.


• Industry: Manufacturing
• Company Size: Medium
• Policy: Workers’ Comp
• Errors Found: MOD Score, Clerical & Payroll
• Refund: $68,500

Company: This family-owned Chicagoland manufacturer was preparing to market the business for sale and wanted to be certain their insurance coverage was sufficient, and the rates fair.

Findings: Our AuditRate Team found three unrelated errors that were contributing to higher-than-necessary workers’ comp premiums:

  1. Experience MOD scores are calculated by relating payroll (not premium) to claims. In this case, the payroll for the governing classification was $1,783,865, but only $178,386 was reported—obviously, the last digit was omitted. This caused the experience MOD for three years to be between 15 and 23 points too high, resulting in a $38,000 overpayment.
  2. Surprisingly, there was a similar error in the clerical classification for another period. While this had less of an impact due to the lower class rate, it still resulted in higher-than-necessary premiums
  3. The current MOD score also contained an error. A claim of $19,000 was recorded, but the claim was for another policyholder of the insurance company, and was not from an employee of this manufacturer. Correcting this error produced a .05 mod reduction

Impact: After correcting each of these errors, the carrier issued refunds of $68,500.


• Industry: Manufacturing
• Company Size: Medium
• Policy: Workers’ Comp
• Errors Found: Classification Code
• Refund: $640,000+

Company: This medium-sized Rockford-area manufacturer approached Alper Services as part of an RFP for a new insurance broker for their workers’ comp program. We took the opportunity to conduct an AuditRate review of their entire insurance portfolio.

Findings: Our review identified errors in the classification code used by their insurance carrier over the prior 4-year period resulting in a mid-six-figure overpayment. After we notified the carrier of the error, they attempted to avoid issuing a refund by retroactively eliminating credits they’d issued the company for implementing safety improvement measures. The company’s legal counsel stepped in and working together, we successfully petitioned the Illinois Department of Insurance to force the carrier to reinstate the credits, and issue a full refund of prior-year overpayments.

Impact: The carrier refunded $640,000 in past-year premium overpayments and reinstated the safety credits the insured had rightfully earned.


• Industry: Manufacturing
• Company Size: Medium
• Policy: Workers’ Comp
• Errors Found: Payroll
• Savings: $11,000/year

Company: This Calumet-area high-tech equipment manufacturer wanted to build a new facility and requested an audit of their business to locate cost savings to devote to capital expenditures

Findings: Since workers’ comp premiums are set at a dollar rate per every $100 in payroll cost, companies are allowed to limit the payroll expense of the highest-paid officers. During AuditRate’s review, we noticed the director of operation’s salary was misclassified to the business’s manufacturing code, even though their job was not in the higher-risk manufacturing classification.

Impact: AuditRate corrected this by properly limiting the director’s salary in the payroll basis saving the Client more than $11,000 per year in subsequent-year premium expense.

Industry: Real Estate

• Industry: Real Estate
• Company Size: Small
• Policy: General Liability
• Errors Found: Clerical
• Refund: $19,200
• Savings: $6,000/year

Company: This Chicago-based real estate and asset management company approached Alper Services to assist with expanding coverage to include employees of a newly acquired former competitor.

Findings: During the course of the audit, we uncovered three clerical errors:

  1. One suburban shopping complex was being charged for a parking lot even though the policy rules clearly stated that parking lots were included at no additional charge.
  2. This parking lot was leased from another entity, which was named on the policy as required by the lease. Even though the manual permits additional insureds to be named in these circumstances without charge, a charge was made for including the owner.
  3. The use of the Client's building changed in a prior year, but the revised use was never reflected on the policy. The premium charge should have been eliminated once the use was changed.

Impact: AuditRate worked with the carrier to correct these errors, recalculate premiums moving forward and refund $19,200 in overpayments; while we could’ve secured more in refunds, the insured’s records only went back three of the five years during which the error existed.

Industry: Non-Profit

• Industry: Non-Profit
• Company Size: Small
• Policy: Workers’ Comp
• Errors Found: Classification Code
• Refund: $3,000
• Savings: 70% reduction in subsequent-year premiums

Company: A Chicago-area non-profit specializing in providing support to inner-city families.

Findings: The insurance industry had recently changed classifications codes applicable to charitable organizations, causing confusion in the industry. Consequently, the insurance carrier assigned an incorrect classification to the insured’s policy. Neither the agent nor the carrier caught the classification error, resulting in overcharged premiums.

Impact: In addition to AuditRate securing a $3,000 refund on their $4,000 expired policy, our work set in motion correct procedures that have reduced all future workers' comp premiums by 70%!

 

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