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Jun 18, 2012

Premium Recovery For Fully Paid Policy

Workers Compensation premium recovery can be very complicated on a prepaid policy. Over the weekend, I received this question -

Our company canceled our policy in February. We had six months left before the policy ended. We have not heard from our prior carrier on refunding any of the prepaid premium. We were not on any type of payment plan. How do we go about recovering our premiums from the carrier?

My answer that I emailed back was -
  • Short-Rate Penalty - As you canceled mid-term, did your company experience a short rate penalty? Short rate penalties can be substantial.
  • Final Premium Audit - as you mentioned you did not hear from the carrier, you should have a premium audit pending to close out the short policy year.
  • Call the customer service phone number listed on your policy.
  • You may get more than you asked for overall. If you have a final premium audit pending with a short rate penalty - your company may owe more than the premium recovery you are anticipating. The premium penalty can be 50% or more in certain cases. All of the rating bureaus have the formula on file. Please be extremely careful on the numbers that are input into the formula.
  • Calculate the short rate penalty on your own - these calculations can be cumbersome and complicated. Your company may want to calculate this number before you contact the carrier.
  • Be patient, your carrier will get around to the audit.
  • As always, if you feel that you are in over your head or that you may end up costing your company more $ by pursuing the premium recovery, you may want to call on a non-agent expert for an unbiased opinion.


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