Q.) What is a premium audit?
A.) A premium audit is the review of an insured’s business records to confirm and verify the correct premium base for a certain policy period. Audits are conducted to determine the actual payroll, sales, or other exposure used to calculate the final premium for a policy period.
Q.) Why is an audit necessary?
A.) When a commercial insurance policy is written, it is usually based on an estimate of payroll or sales that an insured will have for a policy period. Since it is an estimate of future amounts, the insurance company audits the policy after it has expired or been cancelled, in order to establish the actual amounts of exposure and determine the correct premium for that policy period. If the actual premium turns out to be less than the estimate, it will result in a return premium and you will receive a refund. If the actual is more than the estimate, you will owe an additional premium, for which you will be billed.
Q.) Are there different types of audits?
A.) Yes. They are defined below.
Physical Audit – This audit is conducted at your place of business. The auditor will review your operations and business records. The auditor will contact you to set and appointment for the audit that is mutually agreeable to both you and the auditor.
Voluntary Audit – This type of audit is not done at your place of business, but rather is a request for you to complete an audit form and provide verifying records. It is usually conducted via the mail. You are sent a form and directions to complete it and return it to the auditor. Occasionally, a voluntary audit is conducted via telephone. In such cases you may still be asked to mail or fax verifying documentation to the auditor.
Preliminary Audit – This type of audit is done at the beginning of a policy year to review operations, classifications and exposures. The auditor will try to get a good representative time period for review and will project the exposures for the full policy term.
Interim Audit – An interim audit is sometimes conducted during the course of the policy year for a business that may experience fluctuations in operations. This type of audit is used to help keep premiums stable for a business that may have dramatic changes in exposure during the policy term.
Q.) How should I prepare for an audit?
A.) If your workers compensation policy is being audited, the most common records that will be needed are your company's payroll records. These would include, but may not be limited to the following:
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 Sub-contractor Records
Certificates of Insurance for Sub-contractors
If the audit is for a general liability policy, the records needed will depend 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. However, he or she may also ask for other records to help produce an accurate audit.
Q.) How are auditors chosen?
A.) Companion Property & Casualty relies on third-party, independent auditors to audit our customers' policies. We strive to utilize auditors that produce quality audits while representing Companion with courtesy and professionalism.
Auditors are paid a flat fee for each audit they perform (plus an hourly adjustment for more complicated or time-consuming audits). They are not paid any percentage or commission for generating higher premiums. Auditors send the information they collect to Companion P&C where we process the completed audit with our own in-house staff.
The Premium Audit Department at Companion P&C is dedicated to insuring that audits accurately reflect the policyholder’s operations, classifications and exposure basis.
Q.) What if I disagree with the results of an audit?
A.) 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 for additional accuracy. Please click on this link to electronically file an Audit Dispute.
Q.) How can I contact Companion P&C if I need additional information regarding an audit of my policy?
A.) Contact us at:
Companion Property & Casualty Group
P.O. Box 100165
Columbia, SC 29202-3165
Premium Audit Department Fax Number: 803-264-9414
Phone number: 1-800-845-2724
Email: audit.department@companiongroup.com