Who Should I Hire?
There are several companies, agencies, and agents who claim to provide a “mod audit” or “premium audit.” The problem is there are as many definitions of “mod audit” or “premium audit” as there are suppliers of the service. So – how do you know who to hire to determine if your workers’ compensation premiums are correct? Answers to the following questions and application of the following suggestions will help.
Are you considering a company that has ties to the insurance industry?
Are kick-backs involved? That is, is the consultant paying finder’s fees? Is there some other exchange of dollars between the consultant and the agent/agency? If so, conflicts of interest are likely. In my opinion, if an audit isn’t objective – it isn’t an audit. Are you relying on your agent/agency to assure that your premiums are correct? If so, your premiums are probably not correct. I say this for three reasons.
- I have yet to meet an agent who is also an auditor.
- I have yet to meet an agent who is knowledgeable in the rules and regulations throughout the country. If you believe they are knowledgeable, give them the very basic test that is provided in my letter titled “Test Question.”
- In most cases, the agent is paid a commission. Where is his/her incentive?
Does your auditing firm have expertise outside of the insurance industry?
If not, you are probably not getting an objective audit. When I co-founded Synergetic Solutions in 1996, we employed people who were from the insurance industry. Many were long-time underwriters. They were good honest people but I learned that they were so entrenched in the insurance industry’s way of doing business that they were blind to obvious overcharges. We now have thirty employees and plan to expand to between 50 and 75. However, I do not plan on hiring people from the insurance industry for the reasons mentioned above. Instead, we hire bright people with the capacity to audit. Then we teach them how to audit.
Are you hiring an auditing firm or a consultant?
If you need advice on risk management, classifications or claims management a consultant may suffice. However, if you want to know if your premium is correct, if your experience modification factor is correct, or if you’ve overpaid premiums, you need an auditing firm. Expecting a company other than an auditing firm to provide an audit will not result in success – but – would you ever know?
How do I know if a company is an auditing firm or a consultant?
Anyone can claim to provide an audit but an auditing firm will adequately answer all of the following questions.
- Do they have an audit procedure?
- Do they use an audit checklist in combination with their procedures?
- Do they have a quality control process? What percentage of completed audits do they sample?
What about price?
As with most products and services, you get what you pay for. There are companies who offer 30% or 40% contingent fees. Would you rather recover 70% of $5,000 or 50% of $100,000? If all things were equal, the lower contingency fee should decide who you hire. Clearly, all things are not equal.
How do I know who will recover the most money for me?
A reputable auditing firm that has been in business for a reasonable amount of time should be able to provide you with:
- Overall success rates.
- Success rates broken down by category of client. An explanation of the category should be understandable.
- Probability of recovery for accounts similar to yours based on their experience.
- Average recoveries for the profile of accounts similar to yours.
- Largest recovery in each category of clients.
- Number of recoveries exceeding some number – say $100,000.
If such information is not readily available, I question the company’s expertise.
How do I know if the company has a reasonable amount of experience?
Any company can claim to provide a premium audit regardless of their expertise or experience. The following questions will help you to know if the company has a reasonable amount of experience.
- How long has the company been in business?
- How many employees do they have?
- How many clients have they served?
- How many audits have they completed?
- How many audits have they completed in states where you do business?
What are other considerations?
- Does the company utilize its own sales force or does it outsource?
- Check references but remember this is a “happy customer” list.
- Ask the reference about communication. Were they satisfied?
- How long did the audit take?
- Did they assure that the refund was received prior to billing or did they bill prior to the company receiving the benefit?
- Have complaints been registered with the local Better Business Bureau?
- What is the principal’s background?
- What is their experience with state departments of insurance?
- How do they support you if a complaint to a state department of insurance is required?
- How does the company support you if you wish to attend a hearing or pursue legal action?
If a company cannot adequately answer the questions posed in this letter, you are probably not speaking with a professional auditing firm. Our in house sales staff would be happy to answer any of the questions listed above. I think you will like what we have to say.
Please feel free to contact us with any questions or concerns you may have at savings@synergeticsolutions.com or toll free at 800-758-2941.