Being Proactive Can Help Eliminate Overcharges On Your Premium Audits
by Clyde Wilberger, CLCS, Vice President, The Harry A Koch Co.
Many insured wait in fear to hear how much additional premium they owe once the auditor leaves their office. While carriers strive to be as accurate as possible, they don’t have the time or resources to investigate and resolve every possible error or ambiguity that presents itself. As a result, you may experience multiple, unintentional overcharges by the auditor such as placing employees in the incorrect class code, not calculating overtime correctly or not using the correct payroll figures. If you know the rules, you can take control of the process by anticipating and preparing the exact information your insurance company needs to prevent overcharges. It is highly recommended to discuss class code changes, payroll estimates, OCIP/CCIP work with your agent prior to the audit so there are no surprises once you receive the audit results.
The first step is to create an accurate package ready for the auditor when they arrive.
Normally, you will need to collect the following items for the adjuster:
- Payroll records (employee specific)
- Unemployment tax return
- 1040 Schedule C (if you are a sole proprietor)
- Federal and state payroll tax reports (940s and 941s)
- General ledger, subcontractor ledgers and journals (or 1099s)
- Certificates of insurance from subcontractors
- Your workers’ compensation insurance policy with endorsements
Taking the time to gather this information and making the job of the auditor easier can pay huge dividends.
Here are a few additional tips to follow:
- Have your employees/jobs assigned to a Worker’s Compensation codes in your payroll system, if possible.
- Review the NCCI Remuneration rule that explains what is included and excluded for payroll reporting purposes.
- Review with your Agent your current class codes to verify you are classifying employees correctly.
- Make sure all Subcontractors’ certificates are current and complete.
- Understand which Worker’s Compensation codes allow separation of payroll.
- Understand OCIP/CCIP projects and how they affect your audits.
In closing, being proactive and educated can help make premium audits a routine annual task and help keep your Worker’s Compensation premiums in check. Always ask for an audit worksheet from the carrier to verify the audit information is correct and the refund or additional premium is accurate. By taking these few steps it can help reduce your overall insurance cost.