Premium Audit


Premium Audit – What is it?

Workers’ compensation premium is calculated by a rate, determined by the classification of your business, multiplied by the total remuneration to your employees. Remuneration includes total gross payroll plus certain benefits employees may receive because of their employment. Your policy was issued on an estimated payroll; the audit verifies your business operations and determines the actual remuneration to the employees for the policy period.

The audit is a review of your records and operations. It is a condition of the contract, the policy, that you provide the necessary information and documentation or allow us to examine your records and documents to complete the audit.

The goal of the audit is to assess if your insurance premium accurately represents the proper risk exposure and premium.

All reports and documentation obtained are kept in strict confidence and only used for the development of your audit.


When are audits performed?

Yearly audits are performed at the end of each policy period. Cancellation audits are performed as soon as possible after the workers’ compensation coverage terminates.


How will the audit be performed?

There are two types of audits – mail and physical. If your account qualifies for a mail audit, we will request your records via U.S .Mail. Otherwise, an auditor will contact you either by phone or mail to schedule a time to meet for the physical audit.


Where will the physical audits take place?

The audit will be conducted at the location on file (on you policy). If the audit is to be conducted at a different location, please provide the alternate information to the auditor in advance so the audit may be scheduled at a time convenient for you. If there are multiple locations on your policy please have the records sent to the one location where the audit will be conducted.


What records are required for the audit?

Below are items that will be required. The auditor may request additional information or documents.

  • Quarterly state unemployment tax records and quarterly 941’s for the period
  • Cash Disbursement journal and General Ledger
  • Certificates of Insurance for any subcontractor or contract labor. Subcontractors without a valid Certificate oF Insurance for the entire coverage period on file in your office could be included in payroll and premium could be charged.
  • 1099’s issued along with the 1096
  • Payroll records (Individual Summary, etc) – This report should include the actual overtime paid to each employee.


Who should represent my company at the physical audit?

The auditor must have the assistance of persons familiar with the records and the specific duties of each employee.


Are there penalties for not cooperating with the audit?

For noncompliance with audit an arbitrary audit may be processed charging up to a maximum for three time the estimated premium to which the audit is subject. Also it puts current coverage in jeopardy of being canceled for failure to provide the audit records or failure to cooperate with the auditor.