Due to the COVID-19 pandemic, businesses in all sectors of the economy face uncertainty about their future. At this point, many questions remain about when the pandemic will end and what reopening of the economy really means. Most businesses, particularly those with limited cash to withstand a long shutdown or that depend upon high customer traffic, are facing difficulty managing cash flow to pay their bills. And while paying workers compensation may not be the first thought for most businesses, it remains an essential expense that they must address to remain viable.
InsurePay works with insurance companies across the United States to provide a Pay-as-you-go billing platform for workers’ compensation policies. InsurePay enables a carrier to calculate workers’ compensation premium based on actual payroll data and to invoice the policyholder each pay period (weekly, bi-weekly, semi-monthly, or monthly). In the last three months, companies across the United States have laid off or furloughed tens of millions of workers, and based on recent guidance from the National Council on Compensation Insurance and similar directives from state insurance commissions, insurance carriers are supporting new rate classes for employees who are getting paid but not working and the reclassification of other workers who now work from their homes. These seismic workforce changes are causing dramatic fluctuations in payroll and, in turn, workers’ compensation premium exposure. InsurePay’s core principle — calculating premium based on actual payroll — is proving particularly valuable to carriers and policyholders alike amid the COVID-19 crisis.
Traditional billing methods, on the other hand, are not as responsive to these fast-changing circumstances and are causing unexpected financial exposure for both carriers and policyholders during the current crisis. For starters, traditional billing requires calculation of premium based on the policyholder’s payroll data from the prior year — which likely has no bearing on the reality of 2020. That premium is then collected either annually or through planned installments based on the assumption that payroll will remain consistent throughout the policy period. Traditional billing plans do not account for dramatic shifts in payroll. To realize a reduction in premium to reflect changed circumstances, a policyholder on a traditional billing plan must contact their insurance carrier to request an endorsement to their policy. This can be a cumbersome and time-consuming process, particularly now when many policyholders are impacted at the same time. The endorsement process is also not an exact science and may not fully solve the problem presented by the changed circumstances, leaving policyholders and carriers in the position of working things out at audit time.
Even with endorsements in place, carriers and policyholders still face uncertainty until audit time as to whether they made the proper adjustments. As a result, the premium audit process may become more complex, time-consuming, and costly for both the carrier and the insured. With InsurePay, at the end of the policy cycle, carriers receive a policy audit report that includes all reported payroll, premium calculations by class code and by employee, and business entity information—providing most or all of the data they need to complete an audit. Because premiums were calculated based on actual payroll, any negative financial impact of the audit to the insured and the carrier are greatly reduced.
During this current economic crisis due to COVID-19, the benefits of InsurePay are especially clear: