The Workers’ Compensation Insurance Rating Bureau (WCIRB) hauled two carriers in front of its classification and ratings committee recently to answer for ongoing problems with their data reporting processes and procedures. And it’s not the first time either carrier had been informed of the deficiencies, hence the stepped-up enforcement action involving an in-person meeting and the likelihood of fines being issued.
WCIRB doesn’t disclose who was called on the carpet or the meeting’s final outcome. WCIRB maintains that it never discloses the identity of carriers facing or receiving such disciplinary action, and promises only to release a redacted copy of the meeting’s minutes at some point. But don’t stop reading yet, we’ll save you the wait and provide most of the details it isn’t releasing.
“We’ll talk with someone and they’ll tell us one thing and then the state sends in someone and they talk with someone else and get a different answer. Payroll usually comes out OK, but classifications can be an issue. But we’ll work something out.”
— Lee Valley, vice president of commercial lines with GuideOne Insurance
Is there a sunshine problem? Though WCIRB is a private entity, its role as designated statistical agent for the California Department of Insurance means that it does the people’s business. But there is no public disclosure.
And we’re not just talking about the general public either. Also shut out of the committee’s deliberations was Bruce Wick, public member of WCIRB’s own governing committee. California Insurance Commissioner Steve Poizner appointed Wick, director of risk management for the California Professional Association of Specialty Contractors, to represent the public interest at WCIRB. But Wick was kept waiting in the lobby until the committee arrived at the “public” portion of its meeting. Seems he can act on the committee’s recommendations once they reach the governing board but is not allowed to even observe how the decisions were made.
Department Breaks the Law?
And the Department is doing little to rectify the situation. Senior CDI officials were present for the committee’s deliberations but did nothing about the exclusion or WCIRB’s policy, not at the time of the meeting nor later when given an opportunity to elaborate on the committee’s actions.
The Department, in our opinion, also has failed to comply with California law and respond to a Public Records Act request filed by this publication. This is not the first time the Department has failed to comply with the act.
So Who Was Called In?
So who was called before the committee? An official from Chubb & Son was called in to explain why its data submissions were out of compliance with regard to standards for payroll audits and late reported claims. And GuideOne Insurance was summoned to explain why results from its test audits were showing that too many policies had developed significant differences during the test audit. Both companies are repeat offenders and could face fines and other sanctions, but WCIRB is not saying at this time what punishment was levied in the cases. Its policies call for fines equal to 1/100th of 1% of the carrier’s written pure premium in the most recent calendar year, with a minimum fine of $5,000 and an upper limit of $50,000.
In Chubb’s case, bureau staff found that its Unit Statistical Reports (USRs) contained too high a percentage of unaudited or estimated payroll to be considered reliable. The bureau standard is that a USR contain no more than 5% of payroll that is unaudited or estimated, but during a three-quarter period last year, Chubb submitted USRs with 14.4% of payroll unaudited or estimated. Two years ago the carrier was warned about the same deficiency and was ordered to submit a remediation plan. That plan was submitted a year ago and monitoring of its compliance began with the second quarter of 2008. It was given until the end of 2008 to come into compliance with the standard but failed.
In addition to payroll audits, bureau staff also noted that during 2008 Chubb was out of compliance with its Late Reported Claims standard. Chubb’s representative at the meeting, Anne Rocco, was to explain to the committee why this finding was not indicative of a serious data reporting deficiency at the carrier. WCIRB is not saying if Rocco’s explanation put the issue to rest or if further action will be taken. Rocco declined to comment about the proceedings.
GuideOne was also before the committee to explain why its original classification assignments were not holding up when test audit time came around. WCIRB noted that under its reporting standards not more than 20% of policies test-audited in a 12-month period can develop significant differences during the test audit. In 2005, some 43.2% of GuideOne’s policies in the test audit developed significant differences, and it undertook a remedial action plan in 2006 that seemed to correct the issue. By 2007, the overall difference ratio had dropped to 19.5 %, but last year it crept back up to 21% of the policies test-audited.
The main problem areas involved classifications added or deleted at the test audit (40% of the differences), improper segregation of the payrolls (36% of the differences) and improper use of standard exception classifications (16% of the differences).
Lee Valley, vice president of commercial lines with GuideOne, told Workers’ Comp Executive that most of the carrier’s insureds are churches, and these present a unique set of challenges. “We’ll talk with someone and they’ll tell us one thing and then the state sends in someone and they talk with someone else and get a different answer,” he explained. “Payroll usually comes out OK, but classifications can be an issue. But we’ll work something out.”