Or. Admin. R. 836-043-0130

Current through Register Vol. 63, No. 9, September 1, 2024

Section 836-043-0130 - Selection of Risks for Test Audit

(1) All insurers or insurer groups shall be test audited on a continuous basis. Each quarter, the bureau shall send a list of policies selected for test audit to each insurer's Oregon policy issuing office or other office designated by the insurer.

(2) The number of policies to be selected for each insurer shall be determined based on Exhibit 1, using the insurer's current policy premium distribution and the error ratio from the insurer's previous test audits. The policy premium distribution shall be based on estimated annual standard premium reported by the insurer for policies subject to selection. For each insurer, the error ratio shall be the number of policies found to have audit errors divided by the total number of policies test audited during the latest six quarters. The error ratio shall be assigned a credibility weight, as described in Exhibit 1, and the complement weight shall be assigned to the statewide error ratio of all insurers for the latest six quarters. The credibility weighted error ratio for the insurer shall be used to determine the policy sample rates in Exhibit 1.

(3) The quarterly list of policies selected for test audit shall be randomly drawn from an insurer 'entire book of workers' compensation business, subject to the requirements of section (2) of this rule. Additional policies may be added at the request of the director. The list shall indicate, for each insurer or insurer group, the insured, the policy number, the issuing office (if available) and the policy dates. This list shall only include policies with expiration dates not less than 90 days prior to the date of selection. Unless otherwise requested by the director, this list shall exclude:

(a) Wrap-up policies approved under ORS 737.602 or Sections 1 and 2, Chapter 336, Oregon Laws 1995;

(b) Policies for risks that have been test audited within the four-year period prior to the date of selection; and

(c) Policies canceled by either the insured or the insurer prior to the expiration date of the policy.

(4) Within 45 days after receipt of the selection list, each issuing office shall provide the bureau the following audit material on those risks for which it is responsible:

(a) If an audit is performed, a non-returnable copy of the auditor's work sheets and the premium invoice;

(b) Correspondence pertinent to proper completion of the audit;

(c) If the insured' payroll report has been utilized, a copy of the insured' payroll report and the premium invoice; and

(d) A list of all compensable indemnity claims. The claim listing should also reflect each compensable medical-only claim with reported loss amounts of $5,000 or more. The bureau must receive at least the name of the injured employee and the date of accident, although the following information must also be submitted if available; job title, nature of injury, Basic Manual classification to which claim is assigned, claim file number and a brief description of what the employee was doing when the accident occurred. (See Exhibit 1.)

(5) At least 10 days before the test auditor's planned date of call, the auditor must inform the insured in writing of the planned date of call.

(6) The written notice required by section (5) of this rule must include certain information. An example of acceptable written notice is located on the Department of Consumer and Business Services, Insurance Division website at www.insurance.oregon.gov. The notice must include the following information:

(a) Identification of the insurer, the insured, the policy number, and the policy period being audited;

(b) The scheduled date and time of the test audit;

(c) Explanation of the test audit program and the statutory authority to conduct test audits;

(d) Identification of the bureau responsible for conducting the test audit;

(e) Explanation of the bureau' authority under the policy to examine the insured' records;

(f) Explanation of the types or specific records the insured must make available to the auditor; and

(g) Contact information for the auditor.

(7) The bureau shall complete the test audits within six months of the date of selection. Test audits not completed within the six-month period may not be included in the insurer's result. Nevertheless, the insurer shall submit a revised unit statistical report for any late test audits that would have otherwise constituted an error. The director may request the bureau to provide a quarterly report of test audits that are not completed in a timely manner.

(8) The following must be obtained from bureau files:

(a) A policy data sheet providing all necessary information shown on the insurer's policy; and

(b) A copy of the latest bureau inspection.

Or. Admin. R. 836-043-0130

ID 1-1988, f. & cert. ef. 1-20-88; ID 11-1994, f. 12-19-94, cert. ef. 1-1-95; ID 7-1997(Temp), f. & cert. ef. 5-30-97; ID 18-1997, f. 11-25-97, cert. ef. 11-26-97; ID 12-1998, f. & cert. ef. 9-14-98; ID 13-2012, f. 7-16-12, cert. ef. 1-1-13; ID 5-2019, amend filed 04/19/2019, effective 7/1/2019

Exhibits referenced are available from the agency.

Statutory/Other Authority: ORS 731.244 & 737.318

Statutes/Other Implemented: ORS 737.318