Principal, Cytron Group LLC
A large, well-known insurance company tried to take my employer for several hundred thousand dollars. That’s where the story of my career and business begins.
Everyone, or someone close to them, has had a horrible personal experience with an insurance company; either through one’s personal insurance or professionally through her business. Even if you think you’ve been unscathed, it could be happening right under your nose.
It was through such an experience more than 20 years ago that I was educated about the needlessly complicated (and prone to error) pricing system of workers’ compensation insurance.
After obtaining my MBA I went to work in the Treasury Department of a large, regional bank doing interest rate risk management. The bank was bought and, rather than relocating, I took a position with a large contractor doing finance-related work. Work comp was a major expense for us, and it was an important piece of the pricing structure for our proposals. I thought I knew a lot about work comp premium determination. I tracked our Experience Mod and went through renewals, payroll audits, etc. from the client side a few times.
Our CFO informed me one day that our work comp carrier had performed the annual payroll audit, reclassified our entire operation into a higher-rated (more expensive) class code, reopened the prior year's audit to do the same, and sent us an additional premium bill for a lot of money; hundreds of thousands.
That didn't make sense to me at all. This company had been in business for a long time (2 generations of family ownership) and had never "told" anybody how the business should be classified. We were always assigned classifications.
We had a broker from a large, reputable firm as a trusted advisor and a long-term insurance carrier relationship whose auditors visited annually. Wasn't it the insurance carrier and/or our broker who determined this? Why was it our responsibility to pay the insurance carrier for something it got wrong after the policies had expired?
Seemed to me like a car dealer calling you 12 months after you purchased a vehicle, asking if you're happy with it, and then adding "oh, by the way, we mispriced your car and you should have paid more, so, we are sending you a bill." Of course, that would never fly. The thought of writing the insurance company a huge check in these circumstances was infuriating.
At this point we called our broker only to find out quickly that a broker isn’t an auditor or premium expert. Where can you turn for assistance? Who could I call?
We told the insurance company to go "pound sand" and they, in turn, filed a lawsuit.
But, in the meantime, think about how additionally frustrating it was that we possibly underpriced all of our jobs for the prior 2 years. If the insurance carrier was right, they could have prevented the entire mess by doing the due diligence they should have undertaken before writing the policies. They could have easily (I know now) done a preliminary test audit to make sure they understood our operations and classified them properly.
Additionally, now that there was a full-blown legal battle how should we have priced all of the jobs we were in the process of bidding not knowing how this was going to turn out?
What a mess! And, at that point of the story it had never crossed my mind that we were getting clobbered in ways other than the reclassification.
Our attorney hired an expert witness who fought the reclassification and, in the process, discovered numerous other errors unrelated to the lawsuit that increased our premiums. Guess what?! The insurance carrier's attorneys dropped the lawsuit and never refiled after reading our expert's deposition.
It was at this time that I really started to think “What a mess!”
· Clerical errors
· Data errors
· Audit errors
· Credit programs that were not disclosed
Remember our fear that maybe we had underpriced our work for two years? Heck, we overpriced ourselves! We could have structured less work comp expense in our proposals. Maybe we would have won some additional work. Lost sales!
And, none of these errors were "hiding in plain sight." They were errors that only an expert would be able to look for and uncover. What started out as a dispute over proper classification revealed errors such as our insurance carrier charging rates they hadn't properly filed with the state!
The problems with insurance, in my opinion, are most pronounced with workers’ compensation insurance:
· Very Expensive
· Lack Of Transparency
· Needlessly Complex Pricing System
· Hidden Charges
· Undisclosed Credit Programs
The whole experience was such an eye-opener for me that I "wanted in." I wanted to know what this expert knew. I wanted to help hard working business owners save money. I wanted to educate business professionals so that insurance companies couldn't charge improper premiums. In a nutshell, I wanted to deliver some transparency to this system.
So, the expert witness I worked side-by-side with became a mentor and friend to me. We worked together for a long time prospecting for new business, conducting audits, representing clients in hearings, and recovering a lot of money.
Errors were so common that I structured my business as a contingency-fee business which allows anyone to have the benefit of expert review for no out-of-pocket fee. I only invoice customers upon their receipt of insurance company refunds or credits. It just didn’t seem fair to me that the only way for my old employer to dispute the insurance carriers actions (incorrect actions!) was to hire expensive attorneys and consultants.
I want to deliver transparency and return control back to business. And, I want to do this for you so you don't have to learn about these problems the way I did! Work comp insurance problems reduce our ability to make proper pricing decisions, minimize and/or reduce our overhead, and properly control our businesses.
Going back to the lawsuit, none of us would have thought of the insurance company as doing us a favor of course. But, we would have never known about numerous overcharges made on our work comp program were it not for the carrier aggressively trying to overcharge us even more! And, I would not have had the opportunity to assist hundreds of clients reduce work comp premiums and recover overcharges.
Through the years, hundreds of audits, and getting to know my clients I have been able to learn about other tried and true practices (beyond auditing) my clients have employed to cut claim costs and reduce premiums. Once we undertake an audit, get to know more about a client's operations and claims experience, and identify recurring problems there could be any number of suggestions we may be able to recommend to further reduce costs.
While we can’t promise to deliver transparency and control in all aspects of your business, we can give you this peace of mind with respect to your workers’ compensation insurance costs if you just reach out. Go ahead! You have my permission. ;)
Cytron Group LLC has more than 2 decades worth of experience and has saved clients millions of dollars in the form of returned overpayments. That doesn't even consider the future savings clients have benefited from in terms of reduced rates, reduced experience modification rates, etc. It would be a privilege to have the opportunity to do the same for you.