Pennsylvania Test Audit Program
The Pennsylvania Compensation Rating Bureau (PCRB) operates to ensure compliance with PCRB classification directives; the PCRB maintains a field audit staff to conduct premium audits on selected workers compensation policies.
Test Audit Summary
The audit results are compared to those conducted by the carrier for the same insured. The carrier audit may have been completed by the carrier's own staff or by its assigned service company. Recently, the PCRB has begun tracking results not only by carrier but also by Service Company.
Audit Selection Process
Audits are selected and compared on a quarterly basis. The number of audits selected is based on the dollar volume of written premium. Further selection is made on individual policies based upon certain premium thresholds. The maximum number of "test" audits selected quarterly per carrier is 15, or 180 per year.
Quoting from the PCRB Bulletin
"Any carrier that attains a difference ratio of 25 percent or above for a four consecutive quarter measurement period (minimum 25 audits) and a difference ratio of 20 percent or above for the most recent quarter will be required to submit an action plan, detailing in writing measures it will be taking to bring the carrier in compliance with the less than 20 percent difference standard of the Test Audit Program.
This plan must include a comprehensive analysis of the problems the carrier understands to be the basis for its substandard test audit performance, as well as the specific steps the carrier will be taking to remedy these problems.
To facilitate a mutual evaluation of progress towards compliance, the action plan must establish interim target difference ratios for each of four consecutive quarters subsequent to the approval of the action plan by the Bureau, such that the Test Audit Program standard of a less than 20 percent difference ratio is reached not later than the last quarter of that period.
The action plan must further state the intention that performance in compliance with the less than 20 percent difference standard of the Test Audit Program will be maintained over an additional period of four consecutive calendar quarters immediately following the period to which the carriers' interim target difference ratios will apply.
The four consecutive quarters subsequent to the approval of a carrier action plan by the Bureau is considered the "first stage" of the action plan review process. The four additional consecutive calendar quarters immediately following the first stage is considered the "second stage" of the action plan review process."
Further scrutiny by the PCRB is conducted depending upon the results of the action plan. Please visit the PCRB Test Audit Bulletins page and the PCRB home page for further details.
Proven Test Audit Success
The industry average error ratio for the past 4 quarters was 20.7 percent which is slightly over the PCRB intended goal. RLD Associates knowingly was involved with over 800 test audits during calendar year 2007. Our bureau test audit error ratio was far below the average for the industry. We are proud to announce that we have been mentioned in several Action Plans filed by carriers to help bring them into compliance with the acceptable error ratio percentage.
We have had such success in our efforts that several carriers have been allowed to "opt out" of the test audit program for a one year period. We think our track record speaks volumes for the quality of our audit product. It also accurately represents the attention to customers' service needs long after the audit has been completed and submitted to them. Should you find yourself needing help and guidance with PCRB compliance issues, please do not hesitate to contact us.