• About Us |
  • Follow Us: 
theinsurance411.com logo

The Insurance 411

What you need to know about insurance

  • Essential Property and Liability Insurance
    • All Property & Liability Topics
    • Business Income Insurance
    • General and Auto Liability
  • Specialized Insurance Policies
    • All Specialized Prop & Liability Topics
    • Credit Risk
    • Cyber Insurance
    • Directors & Officers
    • Employment Practices Liability
    • Environmental Liability
    • Professional Liability
    • Surety
    • The Basics
  • Workers’ Compensation Insurance
    • All Workers’ Comp Topics
    • Claims Management
    • Controlling Costs
    • Loss Prevention
    • Regulations
    • The WC Basics
  • Employee Benefits
    • All Employee Benefit Topics
    • Affordable Care Act – “ObamaCare”
    • Benefits Management & Compliance
    • COBRA
    • Dental Insurance
    • Group Disability Insurance
    • Retirement Plans
    • Vision Plans
    • Voluntary Benefits
  • Essential Property and Liability Insurance
    • All Property & Liability Topics
    • Business Income Insurance
    • General and Auto Liability
  • Specialized Insurance Policies
    • All Specialized Prop & Liability Topics
    • Credit Risk
    • Cyber Insurance
    • Directors & Officers
    • Employment Practices Liability
    • Environmental Liability
    • Professional Liability
    • Surety
    • The Basics
  • Workers’ Compensation Insurance
    • All Workers’ Comp Topics
    • Claims Management
    • Controlling Costs
    • Loss Prevention
    • Regulations
    • The WC Basics
  • Employee Benefits
    • All Employee Benefit Topics
    • Affordable Care Act – “ObamaCare”
    • Benefits Management & Compliance
    • COBRA
    • Dental Insurance
    • Group Disability Insurance
    • Retirement Plans
    • Vision Plans
    • Voluntary Benefits
Top Business 411 Stories
  • | Marijuana and Workers Compensation
  • | How to Get Sued By Your Employees in 10 Easy Steps
  • | Employee Dental Insurance for Every Budget
  • | How Do Your Healthcare Providers Rate?

Workers Compensation Audits and How They Work

November 14, 2016 by The Insurance 411Leave a Comment

workers compensation audits

Your workers compensation audit will determine the insurer’s actual risk exposure based on exact payroll and classifications.

Many workers compensation policies include a provision that allows insurers to conduct workers compensation audits. The results of an audit will affect your premiums, so it benefits you to be prepared!

WHAT ARE WORKERS COMPENSATION AUDITS AND WHAT ARE THEY FOR?
Unless you’re a smaller employer with a “minimum premium” policy, your workers compensation policy likely includes a provision that allows your insurer to conduct a worker compensation audit. That’s because your premiums are based on an estimate of your payroll and employees’ job classifications. At the end of the policy period, an audit will determine the insurer’s actual risk exposure based on exact payroll and classifications. This “audited exposure” determines whether you owe additional premium or whether the insurer owes you a refund.

Audits have another important function. The information on your organization’s payroll, classifications and loss experience will be pooled with data from other employers. These statistics help insurers more accurately predict their risk and rate their policies.

WHAT SPECIFIC INFORMATION DO INSURERS LOOK FOR IN WORKERS COMPENSATION AUDITS?
Your workers compensation premiums depend on two factors: your payroll and your classifications. Insurers assign a classification code to the employer based on industry. Your employees will also have occupational codes. These codes reflect the relative risks of the industry and the job. For example, in a relatively high-hazard industry like heavy construction, most employees will have high-hazard jobs; their occupational code would reflect that risk. But the bookkeeper and other office staff would have a lower risk of injury, so they would have different job codes.

HOW ARE WORKERS COMPENSATION AUDITS CONDUCTED?

To perform the audit, the insurer might simply send you a form to complete. If you get a paper-based (or web-based) audit request, respond as quickly and completely as possible.
Sometimes an insurer will want to do a physical audit, in which the auditor visits the employer’s location. If there are questions on your audit, or if you think the insurer has misclassified some of your employees, you might request a physical audit.


WHEN DO INSURERS CONDUCT WORKERS COMPENSATION AUDITS?

Insurers may conduct an audit shortly after a policy starts to ensure the accuracy of their premium estimate. More commonly, they will conduct an audit at the end of the policy term. You might get audited annually or less frequently. If your policy has a three-year “lookback,” for example, the insurer reserves the right to audit premiums for the past three years. When it does, it can collect premiums owed for that time, but it will also refund you any overpayments you might have made.

WHAT DO INSURERS LOOK FOR IN WORKERS COMPENSATION AUDITS?
The insurer will look for three types of information:

  • Payroll information: You’ll want a list of all employees and the hours they work, along with their payroll information. Payroll for workers’ compensation purposes may differ from payroll you report for tax purposes. This can include: wages or salaries; commissions; bonuses; overtime; and sick, holiday and vacation pay. Some states allow employers to count overtime pay as straight time, and you can generally exclude tips.
  • Job descriptions: These should include a list of daily duties and where employees perform those duties. Be as accurate as possible. Job descriptions will determine the employee’s occupational class, which determines the rate you’ll pay for coverage.
  • Independent contractors and subcontractors: Be prepared by having pay information on any of your independent contractors. Your insurer might request it to ensure you are not avoiding paying workers’ compensation by misclassifying workers who should classified as employees.

Your auditor might also want information on subcontractors’ employees, including occupational class and payroll. In some industries, particularly construction, a sub’s employees might not have adequate coverage, leaving the employer liable for claims. To avoid this, obtain certificates of insurance from your subcontractors, showing that they had workers’ compensation coverage on their employees during the time they worked for you.

Filed Under: Controlling Costs   •  Workers' Compensation Insurance

[wp_ad_camp_3]

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Read more ⤵

  • Business Insurance
  • Personal Insurance
  • Newest Business Articles
  • All Business Topics
  • Recommended Articles
    • Ways to Make Childcare Costs a Little More Affordable
    • Self Funding 101 For Employers
    • Weight Discrimination on the Rise
    • Understanding Consumer-Driven Health Plans

The Daily Blog

Directory Ad for 411sidebar

Register for Weekly Business Insurance Article Updates

  • This field is for validation purposes and should be left unchanged.

Most Popular

  • Ways to Make Childcare Costs a Little More Affordable
  • Title VII Non-discrimination Protections Apply to LBGTQ Individuals
  • Drones in the Workplace
  • Why Stress Is a Work Safety Problem

Attention Insurance Agents

If you are looking for quality insurance content for your own customized newsletter, please visit Smarts Publishing:
https://smartspublishing.com

Business Insurance 411

  • Essential Property and Liability
  • Specialized Policies
  • Workers’ Compensation
  • Employee Benefits

Personal Insurance 411

  • Homeowners Insurance
  • Auto Insurance
  • Life & Health Insurance
  • Personal Insurance Basics

Read More

  • Business 411 Articles
  • Personal 411 Articles
  • Top Stories Business
  • Top Stories Personal

The Daily Blog

  • Newest Business Articles
  • Newest Personal Articles
  • Most Popular Business
  • Most Popular Personal

Copyright ©2019 TheInsurance411.com

  • Home
  • Terms of Use
  • Privacy Policy
  • About Us
  • Contact Us