Insurance Experts Evaluate Alleged Fraud by Workers Compensation Insurers


Insurance Expert Witness

This case involves a number of workers’ compensation insurers. A number of public entities had experienced issues with their workers’ compensation insurers increasing premiums following annual policy assessments conducted by the insurance firms. This behavior continued for a number of years, during which time the public entities began to consider the possibility of bad faith actions on the part of the insurance firms. Eventually, it was discovered that the insurance firms may have formed an improper relationship with an external debt collection firm, which would pursue collections actions against customers of the insurance firms who were unable to pay the higher premiums assessed by the insurance firms.

Question(s) For Expert Witness

  • 1. Please describe your experience with workers' compensation insurance.
  • 2. Are you familiar with Texas rules/regulations?
  • 3. Do you have knowledge of the workers' compensation insurance audit process?

Expert Witness Response E-083993

I have a broad insurance knowledge, including P&C, workers’ compensation, life & health insurance, and annuities. I wouldn’t necessarily consider myself an expert in workers’ compensation, but I have dealt with it extensively and I am an expert in insurance regulation, particularly in Texas. I spent 27+ years with the Texas Department of Insurance and was the Deputy Commissioner of Financial Regulation from 2007 until 2015. An insurer does have the power to look at the numbers and make sure they are appropriate based on the policy terms. A lot of times, an adjustment will be made based on what the actual payroll/employment was. They’ll look at premiums and loss experience and make adjustments accordingly. In the past, when I was an auditor, I would examine insurance companies to see how they were performing workers’ compensation audits. I would be happy to take a look at this situation and provide an opinion as to whether or not there is any wrongdoing on the part of these insurance companies. I am now retired; I have no affiliations with Texas insurance companies.

Expert Witness Response E-035982

My initial approach would be to review the premium audit performed by the insurance carrier. This would involve a review of the payroll, classifications, experience modification factors, rates and other variables to determine whether the final premium was properly computed or not. I have significant experience in the workers’ compensation arena and have worked on the audit of multiple workers’ comp carriers on behalf of state insurance departments. I have also reviewed multiple workers’ compensation rate filings. I have personally reviewed billions of dollars in workers’ compensation loss reserves over the years. In addition, I have performed a peer review of the ratemaking processes of the NCCI on behalf of the state of Florida; that report is available online. I have just finished working on a case that involved the premium audit of a workers’ compensation policy and concluded that the audit was performed illegally. The case settled favorably for the defendant the day before trial. I have been invited twice by the California Department of Insurance to perform presentations to the financial examiners regarding workers’ comp claims, underwriting and laws.

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