Is Your Workers Compensation Audit Wrong or Maybe You Just Don’t Agree With The Results – What Should You Do?

It’s true, workers compensation audits cause problems! They can and do cause serious disagreements between policyholder, insurance agent and insurance companies. But, just because you don’t agree with your workers compensation audit doesn’t mean it’s wrong! We’ve worked with many policyholders over the years who come to us because they’re sure their audit must be wrong only to find, after analysis, that it is in fact correct. Let’s explore why this happens and what a policyholder should do if they think there’s a mistake!

To begin, you must understand that there is a great deal of difference between policyholders. Some are very sophisticated and manage large numbers of employees and complicated workers compensation and human resource programs. Others are less sophisticated, who may operate small family owned or individually owned businesses with few employees and basic workers comp programs. Likewise, workers compensation programs can range from very complicated loss sensitive rating programs to very basic guaranteed cost plans. Regardless the level of sophistication of the policyholder or program, all must go through the audit process.

The very nature of the audit process, classification of employees, inclusion or exclusion of certain owner/officer classes of employees, proper record keeping and payroll reporting creates an environment where mistakes and misinterpretation naturally exist. And it’s this environment that must be explored when it’s believed there is a problem with an audit.

Probably the single most misunderstood area in this whole process is that of classification codes and employee classification. Reclassification of employees at audit can create a great deal of problems. We recently worked a case for a construction company where the insurance company had previously allowed payroll separation but at a recent audit had dumped all the payroll into the highest rated classification. This act generated an additional $97,000 in premium for the policyholder. The policyholder had relied upon their accounting firm to provide the auditor with the correct information. A change in personell at the accounting firm resulted in the information provided to the auditor to be in a different format than years before. It was no longer separated in a proper form so the auditor placed the entire payroll into the highest classification. Months later, after working with the accounting firm and auditor, we were able to arrive at a satisfactory re-audit result for the policyholder.

How can you tell if your audit is really wrong? Sometimes you can’t! But take a look at this page on our website. It may be of help because it describes the basic tell tale signs of potential audit errors.  

What should you do if there is a mistake on your audit? Of course I’m going to suggest you contact a Workers Compensation Consultant for help. These problems are time sensitive and can become very complicated resulting in cancellation of coverage, collection, litigation and in some cases the inablity to secure future coverage. So seek out professional help!

Remember, just because you don’t agree with your audit doesn’t mean it’s wrong! But if you have questions or need help don’t wait, contact an Independent Workers Compensation Consultant for assistance!

Hope this helps you out! Thanks!