Cancellation, Termination or Canceled Workers Compensation Policy...
The act of terminating a workers comp insurance policy before its normal expiration date. The cancellation can be requested by the policyholder or by the company under certain circumstances.
When a policyholder asks that a workers compensation policy be cancelled the actual process of cancellation is rather simple. The insurance company or insurance entity will ask their policyholder to provide them with a request in writing. Most of the times this request is provided on a cancellation request form typically an Acord form provided by the policyholders insurance agent or insurance company. This form will indicated the policyholders name, address, policy number, dates the policy are in force and a date and time of cancellation requested. This form will also require a signature of the policyholder along with a witness of their signature and a signature of the producing insurance agent or broker along with a date the form was completed. Once this has been completed the form will be sent to the insurance company for processing. In order to properly cancel a workers compensation policy this process must be followed...really it makes common sense...the policyholder must notify their insurance company of their desire to cancel the policy, otherwise the policy, if it's paid for, continues in force.
The insurance company may terminate a workers compensation policy only according to very specific rules as outlined by the state regulators in the state where they conduct business. For example an insurance company may cancel a workers comp policy if the policyholder has stopped making his payments. This is called cancelled for non-payment of premium. However in order to do so the company will have to follow the rules that apply to cancelling a policy for non-pay. These rules may include a specific notice method and time period that has to be given to the policyholder such as a 10, 15 or 30 day notice. The method of notification may also be specific such as requiring the insurance company to notify the policyholder by certified mail of such an action. These rules will vary from state to state. You can check with the state department of insurance for each state to learn more about the rules they must follow for cancellation.
And finally, there is the question of how the audit process will be handled when a workers comp policy is cancelled. You should always refer to the workers comp insurance policy for answers to this question. In general, the basic rules continue to apply; a workers comp policy is an auditable insurance policy and the final premium is not determined until the policy has ended which means some method will be used to make that determination. If the policy is cancelled by the policyholder the final premium will normally be calculated on a short rate basis, meaning the insurance company will use its short-rate cancellation table and procedure. (this will cost the policyholder more) When a policy is cancelled by the insurance company the final premium will be calculated on a pro-rata basis and no short-rate will apply. As far as the audit process goes, the wording in a standard work comp policy leaves that open to the insurance company. When examined, you'll find they use words like "we may" conduct audits...etc.etc...this would lead you to believe the audit process is one up to the company and its internal rules.