Forensic accounting investigation: Compliance with state insurance department assessment calculation

CASE STUDY Company Publically traded insurer

Challenge Alleged statutory noncompliance

Services provided Team of forensic accountants perform internal investigation
THE SITUATION Our client, a publicly traded property and casualty insurance company providing workers’ compensation insurance to its clients, received several inquiries from state insurance department and state treasury regulators concerning its calculation of second injury fund assessments. During its regulatory compliance audits, the regulators recalculated an additional amount and demanded an amount due. At that time, our client paid the amount. The decision was made to investigate the regulators’ findings.  

THE CHALLENGE Grant Thornton LLP was engaged by the company to provide forensic investigative services in this matter — in particular, to conduct interviews, a regulatory compliance assessment and a transaction testing, and to determine the root cause of the alleged miscalculation, data irregularities and validity of the allegations. In doing so, we were asked to provide forensic accounting and advisory services, and to offer a report of our findings, conclusions and recommendations as a result of the tasks we were engaged to perform.

WHAT THE TEAM DID Grant Thornton’s forensic accountants worked with the office of the company’s general counsel and regulatory compliance department to investigate and assess its statutory compliance, including the recalculation of assessments during the audit period. We learned during our investigation that data anomalies and irregularities in the information provided by the company to the regulators created confusion. The original amounts paid by our client were, in fact, correct. We prepared reports and templates for the recalculation of certain policy assessments based on statute, and presented our findings to internal counsel, outside counsel and regulators.

OUTCOMES The investigation established the fact that our client had prepared the calculation and made the appropriate payment for the assessments due. We determined that the original calculation was correct and additional payments made were due back to our client. Data inconsistency and interpretation by regulatory auditors provided an opportunity for the recalculation and additional assessments. Our client presented the results of our investigation and report to state regulators, who were satisfied with the findings. As a result of our investigation, the company utilized our recommendations to put controls in place to mitigate future risk, make changes to the process of calculating assessments and data collection, and respond to regulators outlining plans for remediation.

CONTACT Frederick J. Kohm Jr.
Partner; Practice Leader
Forensic, Investigative and Dispute Services
T +1 215 376 6040