Premium Audit
Many types of commercial lines insurance policies are subject to an audit at expiration or upon cancellation of the policy term. In certain circumstances, we may perform an audit during the term of the policy.
Why do we need to perform audits? When we write a commercial insurance policy, we base it on an estimate of payroll or sales that you will have for a policy period. Since this is an estimate, we need to audit the policy to establish the actual amounts of exposure. It helps us determine the correct premium for that policy period. If the actual premium turns out to be less than the estimate, you will receive a refund. If it’s more, you will receive a bill for the additional premium.
How to Prepare for an Audit
If we are auditing your workers' compensation policy, the most common records we will need are your company's payroll records. These would include, but may not be limited to:
- Computer-generated payroll records
- Employer's quarterly federal tax return (Form 941 or 943)
- Employer's quarterly state unemployment insurance tax reports
- Federal 1099, W2 and W3 transmittals
- Overtime wages detailed by job class or employee
- General ledger
- Cash disbursement journal
- Individual earning records or time cards
- Check register/bank statements
- Contractor and subcontractor records
- Certificates of insurance for subcontractors
If the audit is for a general liability policy, we will determine what records we need based on the premium basis of the policy. The auditor may need payroll or sales figures or a combination of both. These are some of the most common records an auditor will review. We may also ask for other records to help produce an accurate audit.
Dispute Process
We want your audit to accurately reflect your company’s business. If you disagree with an audit, we will be glad to review your information.
Premium Audit Disputes
If you have a general question about an audit we did for your insurance coverage, you can complete and submit the Audit Dispute Form.
Assigned Risk Disputes
If you have an assigned risk policy and you disagree with the audit's findings, you can file a bona fide dispute. In order to remain eligible for coverage and to suspend future billing and collections, you must follow these procedures. You must pay all outstanding
bills for the premium you owe unless you can demonstrate that the premium is
inaccurate and that you have taken steps to dispute the inaccuracies
with your insurance company. If you dispute all or any portion of this bill, you must:
- Provide a detailed written explanation of why you believe your bill is incorrect.
- Provide a detailed explanation of your estimate of what the premium should be.
- Pay any undisputed portions of the premium owed by the due date on the bill.
Send your dispute letter and your payment for the undisputed portion to
our Premium Audit department within 30 days of receipt of the final
audit. We will not accept a dispute if we do not receive payment for the
undisputed portion. If the audit is disputed, we will consider any endorsements arising from the audit to be part of the dispute. You must pay the undisputed premium for both the audit and the endorsements in order for the dispute to be valid. If you do not pay the undisputed premium on your policy, we will need to initiate cancellation of that policy.
If you'd like more information on premium audits, please see our frequently asked questions.