1. (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. (2) The number of policies to be selected for each insurer shall be determined based on the schedule provided in Exhibit 1, using the insurer's current policy premium distribution, the error rate from the insurer's previous test audits, and the statewide error rate. 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 rate 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 for the audit types specified in Exhibit 1. The weighted average error rate shall be calculated according to the formula shown in Exhibit 1. The weighted average error rate for the insurer shall be used to determine the policy sample rates in Exhibit 1. The director may order additional focused audits in addition to the required test audits described in Exhibit 1. When ordering additional focused audits, the director shall describe risk factors that required additional review.

3. (3) The quarterly list of policies selected for test audit shall be randomly drawn from an insurer’s entire book of workers’ compensation business, subject to a maximum premium of $500,000 from the most recent available estimated annual standard premium reported by the insurer and the requirements of section (2) of this rule. 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:

   1. (a) Wrap-up policies approved under ORS 737.602 or Sections 1 and 2, Chapter 336, Oregon Laws 1995;
   2. (b) Policies for risks that have been test audited within the five-year period prior to the date of selection;
   3. (c) Policies canceled by either the insured or the insurer prior to the expiration date of the policy; and
   4. (d) Self-insured groups.

4. (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:

   1. (a) If an audit is performed, a non-returnable copy of the auditor's work sheets and the premium invoice;
   2. (b) Correspondence pertinent to proper completion of the audit;
   3. (c) If the insured’s payroll report has been utilized, a copy of the insured’s payroll report and the premium invoice; and
   4. (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.
5. (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. (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, Division of Financial Regulation website at dfr.oregon.gov. The notice must include the following information:

   1. (a) Identification of the insurer, the insured, the policy number, and the policy period being audited;
   2. (b) The scheduled date and time of the test audit;
   3. (c) Explanation of the test audit program and the statutory authority to conduct test audits;
   4. (d) Identification of the bureau responsible for conducting the test audit;
   5. (e) Explanation of the bureau’s authority under the policy to examine the insured’s records;
   6. (f) Explanation of the types or specific records the insured must make available to the auditor; and
   7. (g) Contact information for the auditor.
7. (7) The bureau shall complete the test audits within six months of receipt of the insurer’s audit information. The director may request the bureau to provide a quarterly report of test audits that are not completed in a timely manner.

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

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

   2. (b) A copy of the latest bureau inspection.

      [ED. NOTE: To view attachments referenced in rule text, click here for PDF copy.]

Statutory/Other Authority

ORS 731.244 & ORS 737.318

Statutes/Other Implemented

ORS 737.318

History

ID 5-2019, amend filed 04/19/2019, effective 07/01/2019
ID 13-2012, f. 7-16-12, cert. ef. 1-1-13
ID 12-1998, f. & cert. ef. 9-14-98
ID 18-1997, f. 11-25-97, cert. ef. 11-26-97
ID 7-1997(Temp), f. & cert. ef. 5-30-97
ID 11-1994, f. 12-19-94, cert. ef. 1-1-95
ID 1-1988, f. & cert. ef. 1-20-88