Have you received notice of a Workers’ Compensation Premium Audit? Don’t worry, it’s just standard practice to make sure the premium for your workers’ compensation policy accurately reflects your company’s actual exposure (usually payroll) over the policy period. Just keep detailed company records, stay organized, and your workers’ compensation premium audit will be a breeze!
What is a premium audit? A premium audit is required by law or regulation. Workers’ compensation/employers’ liability policy pricing is based on estimates. The audit collects actual data from you and compares that to the initial estimates. Your insurance company is required to audit your employee class codes and total payroll during the policy term.
Why it’s important. A premium audit helps ensure that you’re paying the correct amount for your workers’ compensation coverage and that your insurance company is charging you fairly. It is particularly important if you have an experience modification, which cannot be promulgated without an audit, resulting in more cost than necessary.
What is required of you? You may be asked to provide detailed employee payroll records, tax forms, bank statements, and P&L reports.
What are the possible outcomes of the audit?
- If initial estimates were low, there may be additional premium owed.
- If initial estimates resemble actual data, no further action is necessary.
- If initial estimates were high, premium will be returned to you.
What if you don’t respond and cooperate with the workers’ compensation premium audit? Because the audit is a policy requirement, failure to comply could result in a cancellation of workers’ compensation coverage or disqualification from obtaining coverage from any insurance company until the audit is completed.
Tips for Audit Preparation
- Keep your payroll and sales information up-to-date.
- Classify your employees correctly.
- Assign a designated contact person.
- Review your original policy and prepare any questions you may have.
- Keep three years of files – workers’ compensation insurance providers can typically audit up to three years after a policy expires, with some exceptions like Ohio (two years) and California (one year).
Ami Miller
Ami Miller is AVP, underwriting of the BizCHOICE Transportation Insurance Program, supporting relationships with our broker partners, 3PLs and insureds. Ami has 18 years of last mile delivery industry experience and is a member of the Motor Carrier Insurance Education Foundation, Women in Trucking and WSIA. She holds her BA from the University of Washington and her P&C License. Ami enjoys spending time with family, going to the beach, reading, and listening to music and attending live shows.