04/06/2012. Owner Controlled Insurance Programs & Other Premium Audit Challenges PREMIUM AUDIT SUPPORTS CUSTOMERS BY. Premium Audit.

Transcription

1 04/06/2012 Owner Controlled Insurance Programs & Other Challenges Presented by: Richard Pope, Manager Union Standard Insurance Group LLC PREMIUM AUDIT SUPPORTS CUSTOMERS BY Providing Value Added Services Educating insureds in premium audit procedures Providing the insured with assistance in records maintenance, bookkeeping & other accounting procedures to maximize ease of audit and assist in providing future premium savings Classification assistance Rules interpretations & clarification Helping setup payroll procedures Explaining separation of payroll & when it is appropriate Giving the insured confidence in the fairness of the premium audit process We ll be back every year. Some years you get a refund & other years a charge. 1

2 04/06/2012 PREMIUM AUDIT SUPPORTS PRODUCERS BY Improving submission accountability Providing value added services Enforcing submission accuracy Classification assistance prior to policy quotes Rules interpretations & clarification Assuring the accuracy of your commissions Underwriters 2

3 04/06/2012 PREMIUM AUDIT SUPPORTS UNDERWRITERS BY Improving submission accountability Enforcing submission accuracy Performing a checks and balances function Obtaining additional information Visual Evaluation of Insured Ð Ð Hazards Equipment Additional Information Address change Name change Officer change Underwriters Finance PREMIUM AUDIT SUPPORTS FINANCE BY Insuring the proper premium is being booked Assisting in collections of bad debts Dispute resolution Litigation Obtaining additional information Visual Ð Visual signs of financial distress Accounts payable not being paid Financial records issues 3

4 04/06/2012 Claims Underwriters Finance PREMIUM AUDIT SUPPORTS PRODUCERS BY Verifying validity of claims/claimant information Validating classification data for ISO/NCCI/State Stat Reporting Obtaining additional information Visual Undocumented workers present Visible hazards Employment/Contractor relationships Evaluation of Insured Claims record keeping Claims Actuarial Underwriters Finance 4

5 PREMIUM AUDIT HELPS ACTUARY BY Collecting and Validating Loss Cost (Ratemaking)Data Collecting and Validating Loss Cost (Ratemaking)Data Collecting and Validating Loss Cost (Ratemaking)Data It determines the rates that we will be charging in years to come Rate accuracy may well be the single largest component of profitability for a carrier and their agents Owner Controlled Insurance Program Issues OCIP (or Wrap Up) Workers Compensation Workers Compensation NCCIs Current Guidelines for Exclusion: In order to exclude exposure the specific OCIP (project and/or location) must be excluded on the policy using: WC (TX WC ) specific operation exclusion

6 From the NCCI Underwriting Manual Part One, Rule 3, A, Wrap-Up Construction Projects (Additional Rules: CT, FL, NV, VA) (Exceptions: AK, AR, KS, LA, MS, OK, OR) A wrap-up construction project is a large construction, erection or demolition project for which policies have been issued by one or more carriers under the same management, to insure two or more legal entities that are working on the project. Appropriate classifications are assigned to each separate legal entity based on the operations performed. In the instance of wrap-up construction projects, separate policies must be issued to each eligible entity involved in the project, unless the same person or group of persons owns the majority interest in such entities. Refer to Rule 3-A- 15 for more information about majority interest. The Designated Workplace Exclusion Endorsement (WC ) should be attached to other insurance policies issued to the same entities to exclude the wrap-up project from coverage on those other policies. This eliminates any duplication of coverage. General Liability ISOs Current Guidelines for Exclusion: In order to exclude exposure the specific OCIP (project and/or location) must be excluded on the policy using: GL ISO OCIP (Wrap Up) Exclusion CG

7 No excluded exposure = No reduction in premium Why? Subcontractors carrier is not a party to the OCIP Policy and has no knowledge of the terms and conditions of the policy Subcontractors primary coverage remains in force (dual coverage) Other Concerns: Is OCIP still in force? Does OCIP have a products liability tail? Is our insured a named insured on the GL policy? Is our insured the named insured on the WC policy? Common Classification Problems Excavation (94007) versus Grading of Land (95410) Excavation is defined by ISO as Going below the ground surface to create a cavity, be it done by machine, or in the case of small footings, by hand Check the insureds equipment listings (if we have one). If backhoe, power shovels or excavators are scheduled, the risk is likely an excavator If they work on ponds they are an excavator or a dike/levee constructor Auto Glass Installation included in Glazier/Glass Dealer Class (13590) instead of Auto Repair (10073) Residential lawn sprinkler installation in Landscaping (97047) instead of Residential Plumbing (98483) Lawn Care in Landscaping (97047) instead of new Lawn Care Class (97050) Is our distributor/retailer really an importer or manufacturer? Important questions we have to ask Sin taxes (tobacco, alcohol, etc.) Are they included in sales and why? Conversely, who can deduct these taxes? 7

8 Sin taxes (tobacco, alcohol, etc.) Are they included in sales and why? Conversely, who can deduct these taxes? Apportionment of payroll or sales based on a guestimate percentage. (Practical exceptions versus rule based ISO interpretation) Supermarket (18501) versus Grocery Store (13673) Any risk with sales greater than $500,000 and store area greater than 3,000 square feet = Supermarket per ISO rules Manufacturers who also distribute or retail their own product How should these risks be charged? What is wholesale value? Why is there a charge for an insured subcontractor in GL? What is vicarious liability? Wood floor installation classed in Floor Installation instead of Carpentry: Interior Exposure on risks classified as Auto Repair includes both the charges for labor as well as for parts charged (and used) in the repair. Auto parts used in auto repair do not get classified in Auto Parts Store or in Auto Parts Dealer Residential Interior Phone or Cable TV Installation As long as the technician is at a residence and attaching the final coaxial cable or wire to a device (TV or Telephone, etc.) then the proper class would be Television or Radio Receiving Set Installation or Repair Commercial Interior Phone or Cable TV Installation is classed in Communication Equipment Installation Industrial or Commercial New ISO Restaurant Classifications based on percentage of alcohol sales i.e.. Why does the rate decrease as alcohol sales increase? Per ISO Rule a handyperson cannot perform any work that requires a permit or a license and they cannot hire any subcontractors Property Developers Always put class code Contractors: Subcontractor Work In Connection with Building Construction: Not Buildings:NOC Granite countertop fabrication and installation incorrectly classed in contractor class Tile, Stone, Marble or Terrazzo Installation instead of the correct manufacturing class of Stone Cutting or Polishing Stump grinding in class Landscape instead of Tree Pruning, Dusting, Spraying, Repairing or Fumigating 8

9 Contact Information Richard Pope cell 9