Threatening audit compliance paperwork in the mail? That’s never fun. Protecting your employees isn’t difficult. However, many agents fail to discuss the Work Comp Audit Process. Not that they are hiding it either! It just happens to be a standard practice that trails the policy term, so on many occasions it slips their mind.
The Workers Compensation Policy is procured and bound on a good faith basis between the Agent and the Client. Payrolls for the policy term are estimated figures at the inception. Therefore, the Carriers perform an audit or true-up at the end of the term.
Two main purposes for the Workers Compensation Audit:
1) “True-up” payroll from estimates to actuals
2) Confirm coverage of subcontractors via Certificates of Insurance
PAYROLL TRUE-UP:
This section of the work comp audit will ask you to confirm the payrolls by class codes to your employees. This ensures that the exposure is accurately accounted for.
– If payroll totals are BELOW estimates, you will receive a return.
– If payroll totals are ABOVE estimates, you will be billed for additional premium
*TIP: If one employee performs in multiple class codes, payment must be distinguished for the audit. This will keep from the entirety of the payroll being slated to the higher cost rate.
CERTIFICATES OF INSURANCE FOR SUBCONTRACTORS:
If you use subcontractors in the course of your work, you will need to retain and provide their certificates of insurance (showing WC coverage) as part of the audit. If there are subcontractor costs, for which there is not a certificate, you will be charged.
*TIP: Have a subcontractor agreement that promulgates the needed insurance requirements.
QUARTERLY TAX REPORTS:
Some audits may require quarterly statements. This is something that your accountant can provide. This adds validity to the reported figures to the Carrier or Insurance Company.
ASKING FOR HELP:
Never hesitate to pick up the phone and ask your agent for help understanding. It will only improve the relationship or give insight that better responses may lie elsewhere.
Commercial Insurance is a topic with endless depths and a constantly morphing shape. As independent sources of coverage, we are consistently honing our understanding of the market and the shifts occurring.
Contact our team at Wes Connor Insurance – 704.665.5340.
