Get your ducks in a row before, during and after a premium audit

It might be hard to fathom any type of audit being beneficial, but premium audits are actually just as important to you as they are to your insurance carrier. When you were first issued your policy, the carrier looked at the estimated sales figures or payroll data that you provided to them. They calculated your premiums based on this information. Now that you have real numbers under your belt and an actual experience, the information can be reassessed to determine the correct premium amount.

Depending on how your business operates and the size of your policy, there are several different methods your insurance carrier can use to conduct your premium audit, including:

  1. Mail - your carrier will mail you an audit form and the instructions to complete the form. Once completed, you will return the form by mail to your carrier.
  2. Phone - your carrier will hire an independent audit company to conduct your audit over the phone.
  3. Physical - your carrier will usually conduct the audit at your business, but it could be conducted at an
    alternative location, such as your certified public accountant (CPA's) office.

Regardless of the method, the audit will typically include your disbursements and payroll journals, ledgers, tax and Social Security reports, state unemployment forms, and other accounting records being inspected. As you can see, an enormous amount of data will be inspected. You can use the following tips to help you prepare for your audit, help it run smoothly, and end positively.

Before the Audit

  • You should try to get an idea of what the auditor will be reviewing by looking at the auditor's work sheets and past audit billing statements.
  • Determine which of your employees would be best suited to work with the auditor. Look for someone that's both knowledgeable about the accounting records that will be used in the audit and about what work is done by various employees and departments.
  • Assemble all the accounting records that will be used during the audit.
  • Ensure that you have certificates of insurance on hand for all subcontractors you've used. Don't forget to make sure that your documentation shows all the contractors have their own general liability insurance and workers' compensation.
  • Check that your payroll documents include a breakdown of wages according to class code, department, and employee.

The Day of the Audit

  • To make sure you have all the applicable records easily available to the auditor, you might request the audit be conducted at your business.
  • Don't be afraid to ask the auditor to explain any points that aren't perfectly clear to you.
  • Request a hard copy of what the auditor finds.

After the Audit

  • Carefully assess the audit billing statement, comparing it to your original policy.
  • Don't agree to pay any additional premium dollars until after you've made a list of all changes and discussed any problematic areas with the auditor.

Finally, if you'd rather take more of a "pay-as-you-go" route to paying your Workers' Compensation policies, Fitts Insurance now has carriers who will offer this type of payment program. With this payment method you pay your Workers' Compensation premium based on actual payroll each time your payroll is run. This can mean better cash flow management, no large down payment, no installment billing fees and potential to minimize premium audit adjustments.

As always, we're here to help. Should you have any questions or concerns at all you can contact our commercial lines department by phone: 888-697-6542 or e-mail our commercial lines department.

Fitts Insurance Agency, Inc. www.fittsinsurance.com