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What to Tell Your Clients About Workers’ Compensation Premium Audits

What to Tell Your Clients About Workers’ Compensation Premium AuditsNo business owner likes to hear that they’re being audited. Typically that means spending one of more days having to comb through all of their records alongside an auditor and comes with the possibility of fines or penalties. Premium audits, however, are a normal part of carrying workers’ compensation insurance and are no cause for alarm. Workers’ compensation premium audits simply verify a company’s payroll for the period during which the insurance carrier provided workers’ compensation coverage to determine the final premium for the policy period.

Premium audits can actually work in favor of the employer, helping to ensure that they are not paying more than they need to – or not enough, which can result in an unexpected bill at the end of the policy period. Auditors are there to confirm that the employer’s payroll records match what the policy is written for, and to correct the mistake if they are not accurate. The workers’ compensation insurance broker can help make premium audits go smoothly by informing and preparing their clients for the process.

What Your Clients Need to Know About Workers’ Compensation Premium Audits

Below are some of the most common questions that employers may have about premium audits, as well as information they should know in order to be prepared for their own premium audit.

Why am I being audited?

Many workers’ compensation policy contracts as well as some state workers’ compensation laws require regular premium audits. They are typically done yearly, at the end of each policy period, but may also be done as a cancellation audit after workers’ comp coverage has been terminated. Performing these audits ensures that workers’ compensation coverage has been properly and fairly billed.

Who performs the premium audit?

In certain cases, the audit may be done via mail. In this case, the employer can just send the necessary information in to the insurer. If an account does not qualify for a mail-in audit, a physical audit will be scheduled by an auditor from the insurance company.

What records do I need to provide for the audit?

Each insurer may have slightly different needs, but the most commonly required documents needed to perform a premium audit include:

  • Payroll-related bank statements
  • State unemployment quarterly payroll tax reports, including 941s.
  • Cash disbursements journal
  • General ledger (posted to date)
  • Overtime pay by employee
  • Split of classification by employee, if applicable
  • Certificates of insurance and payroll records for any contractors or subcontractors

What happens if I do not comply with the audit?

Failure to provide audit records, failure to cooperate with the auditor or failure to maintain essential records can result in fines from the insurer or even cancellation of the policy.

About ASIA Workers’ Compensation

Associated Specialty Insurance Agency, Inc. has been “The Workers’ Compensation Specialist for Brokers and Agents” for the past two decades and is committed to providing brokers and insurance agents across the East Coast with expertise and services to develop a Workers’ Compensation policy. For more information about how we can assist you with claims management, anti-fraud measures, and more call (610) 543-5510 to speak with one of our professionals.

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