How to avoid costly workers compensation mistakes.
While workers compensation insurance audits are not necessarily something to fear, business owners need to understand that an audit can result in premium increases should it uncover issues and inconsistencies. The best way to avoid costly rate increases is by nipping workers comp issues in the bud. Here are some of the steps that you should take to prevent expensive workers compensation mistakes.
- Avoid Code Misclassification
During an audit, many business owners discover that they have been underpaying (or in some cases, overpaying) on their insurance premiums. Generally, employee code misclassification is at the root of this issue. Code classifications play a major role in how a business’s workers compensation insurance premiums are calculated. Unfortunately, with 700 codes to choose from, many business owners struggle to apply the right codes to coincide with their business and their employees’ functions.
- Prevent Inconsistent Payroll Reporting
Workers compensation premiums are also based on a business’s payroll information. However, when a business fails to report payroll information to their insurer, issues can arise. Sometimes inconsistent reporting conceals the hiring or release of employees. When payroll information is inaccurate or not up-to-date, it makes it impossible for insurers to gauge a business’s true risk and adjust its coverage and premiums accordingly. If an auditor discovers payroll inconsistencies, then this can result in major workers compensation insurance rate adjustments.
- Require Proof of Subcontractor Coverage
If a business relies on third-parties to handle certain aspects of their operations, then the business must require these subcontractors to submit proof of workers comp coverage. Failure to secure this proof of insurance can create a major problem for businesses, as they must assume the risk of non-covered subcontractors. Should an auditor discover that a business is failing to collect proof of coverage from its contractors, the business will be forced to pay an increased workers comp rate to address this risk.
These are some of the steps that you should take to prevent costly workers compensation insurance mistakes. Do you have additional questions regarding your commercial insurance? If so, then contact the experts at the Scavone Insurance Agency Center LLC in White Plains, New York today.