IRMI Update—Issue #174

An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
December 12, 2007

In This Issue

• Message from the Editor
• Risk Tip: Before, During, and After the Premium Audit
• What's New in The Risk Report
• New Expert Commentary
• New RMIS Review Service Now Available
• How To Subscribe/Cancel IRMI Update

Message from the Editor

Colleague,

As the end of the year approaches, agents, brokers, and adjusters in many states need to obtain some additional continuing education credit to keep their licenses. If you are one of these, please consider taking an IRMI continuing education course. Here are some reasons why you should try our courses:

• They will give you knowledge you can use to provide superior service to your clients.
• If you choose the CRIS program, you can obtain a certification that will enhance your credibility with contractor clients and prospects (and underwriters).
• They are ridiculously inexpensive for such high-quality offerings.
• You'll select from a broad spectrum of personal lines and commercial lines course topics.
• You can comply with your state CE requirements for ethics, flood, or legal courses.
• You can take them at any time of the day on any computer connected to the Internet.

There are other online CE courses on the Internet. However, I promise you will gain more valuable knowledge from IRMI courses than from the competition. If you are going to spend the time, why not seek knowledge that will enhance your job performance rather than simply meeting the basic state requirement? Learn more about our general insurance and construction risk management continuing education programs.

Thank you for subscribing to IRMI Update. Have a great day.

Jack

Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI

Risk Tip

Before, During, and After the Premium Audit—Before your premium audit, be sure your exposures are accurate:

• Notify your broker when changes occur that affect your workers compensation (number of employees, job classifications, payroll, states of operation) or commercial general liability (payroll, sales, area or other basis for premiums) policies. These changes could affect not only the cost of your insurance, but also the insurer's obligation to cover a claim.
• Understand what "remuneration" does not include, such as: expense reimbursement to employees, contributions to benefit plans, work uniform allowances, and perks such as company-provided vehicles. Make sure your payroll records identify the officers, so the auditor can cap their compensation.
• Track overtime pay separately—both by individual employee and for all employees in a classification, so overtime is counted as straight time for workers compensation.
• Verify that your contractors have their own insurance in force. If you don't, their payroll becomes your payroll. If your contractors can't provide certificates of insurance, charge back to them the portion of your insurance cost that is based on their payroll. Follow the IRS criteria to make sure your contractors are "independent."
• Monitor your claim reserves so your debit or credit modification reflects current reserves.
• Once notified of an audit, conduct a "dry run" to compare your projected results with the actual audit.

During the premium audit:

• Have available your federal and state tax reports, ledgers, checkbooks, contracts, 1099s or other documents the auditor specifies.
• If conducted at your site, stay in the room during the audit to answer questions.
• Make sure rates and classifications on the audit match the current policies.
• Make sure officers are identified.
• Ensure the "experience modification factor" used on the workers compensation audit, and any experience calculations used for the commercial general liability policy, are current. If you are not sure the auditor's worksheets reflect your actual claims experience, have the auditor check the claim files.
• If there's an error on the experience modification factor, make sure the insurer notifies the National Council on Compensation Insurance to make the correction.
• Get copies of the draft worksheets from the auditor.

After the premium audit:

• Compare draft worksheets with the final audit. Check for simple mistakes like transposition errors.
• Make sure overtime was not charged inappropriately.
• Ensure no contractors were classified as employees if you had certificates for them and they satisfied the IRS "independent contractor" criteria.
• Make certain former employees are not shown on the payroll unless they actually worked during those policy periods.
• If an error in the experience modification factor was discovered, make sure the insurer corrects it.
• Keep in place all the controls described in the first part of this article.

By: William Henry, Vice President
The CIMA Companies, Inc.
Alexandria, VA

Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. Submit your risk tips. We'll acknowledge your contribution as we did for William.

What's New in The Risk Report

The November issue of The Risk Report, Layered Property Insurance by William K. Austin, discusses some of the issues common to external layered property insurance programs. While a layered property insurance program is significantly more complex than purchasing a single policy from one insurer, it can be an effective way to obtain the broadest coverage and lowest cost.

For IRMI Online subscribers

For SilverPlume Sage subscribers

New Expert Commentary

There are now nearly 1,000 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

• Property/Casualty Insurer Valuation Insights—Jeff Balcombe provides greater insight property and casualty insurer valuation and the market's current pricing.
• Demystifying Auto Rental Insurance—Mike McCracken examines rental car coverage provided by the personal auto policy (PAP) and compares what some rental companies offer.
• Prescribing Risk Intelligence for the Life Sciences Sector—Mark Layton and Terry Hisey explain that a risk intelligent firm recognizes both rewarded and unrewarded risks.
• Captive Insurance Exit Strategy—Mike Mead warns that ending the use of a captive is not so simple as ceasing to do business with it or funding its operations.
• Risk Management and Estate Taxes—Jack Hungelmann explains the insurance coverage dangers when a trust owns tangible property, like a residence, and offers a solution.
• Insurance Evolution: Response to a Changing World—Dr. George Head wonders whether the rise in natural/manmade catastrophes and the industry's response will effect fundamental industry change.

New RMIS Review Service Now Available

You'll save hours of research time with RMIS Review from the comparative vendor information, and recommended process for choosing an RMIS. This one-stop resource relieves the stress of selecting and purchasing a system, and the risk of choosing the wrong one for your needs. See a sample issue and get a special report, at no charge, on RMIS Needs Assessment and Implementation.

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