I’ve been asked this question many times…
The audit process is very important. It’s the time, after the expiration of a workers compensation policy, that accurate information is gathered, applied to an employers policy and the final, correct premium is determined. Understanding the audit process is a must for the employer, agent, company underwriter and auditor in order to develop the correct premium for the policy exposure and to avoid costly disputes and appeals.
If you’re an employer here’s a few tips and what to expect:
- You will be contacted, shortly after the end of your workers compensation policy period, by an auditor representing the insurance company. They will request an appointment or set a time to meet with you to review your records. In lieu of a physical audit, some audits will be conducted by mail, phone or a combination of both.
- The auditor will provide you with a list of your business record items they will need to review. These may include payroll records; tax forms, 941’s, schedule C’s and others for verification puproses. They will also want to review your cash journal and general ledger and checkbook. Other records may also be requested. Make sure your payroll records are broken down by employee, department and type of work they perform.
- If you use subcontractors, independent contractors or have any 1099 compensation you will need to provide certificates of insurance for each of those showing they had workers compensation insurance.
- Make sure you meet with the auditor. They really need to talk with you, the business owner, in order to get a proper description of your business operations.
- Once the auditor completes the audit be sure to ask for a copy of the auditors worksheets.
- After completed, the auditor will turn the information over to the insurance company audit department. They will compile it and produce the final audit and final audited workers compensation premium statement which is then sent to the employer.
- After you receive the final audit statement be sure to review it carefully for errors or mistakes.
- Have your completed audit reviewed by an independent outside source for accuracy.
That’s it in a nutshell! Of course keep in mind the whole process is much more detailed that what I’ve outlined above. But for such a simple, straight forward process, it can really get messed up at times!
As a final thought…be sure to ask questions if you’re not sure what to do about your audit.
Hope this helps you out! Thanks!