February 7, 2024

What Is A Premium Audit In Workman’s Comp Insurance?

Ensuring job site safety and team well-being remains a top facilitation goal for any firm involved in construction. However, one behind-the-scenes process that helps achieve such aims often goes overlooked - the premium audit. What is a premium audit? As unwitnessed as it may be, this risk recalibration process holds hidden importance for building projects and personnel protection alike.

By verifying payroll accuracy post-coverage, premium audits aid equitable allocation of insurance expenses while securing suitable care standards for any workplace harms that arise. It’d only help if construction supervisors understood this stealthy system's significance in establishing rightsized occupational safety nets for their teams. With that said, let’s take a deeper look at what is a premium audit and why it matters.

What Is a Premium Audit?

When a business first obtains workman's compensation insurance, the premium is calculated based on estimated payroll figures and job classifications for the upcoming policy period. However, estimates may differ from actual payroll amounts and operations once the term is complete. This is where premium audits come into play.

A premium audit refers to the process where an insurance carrier reviews business records after the policy expires to determine the accurate payroll and job duties over that time frame. The goal is evaluating whether the business paid the suitable premium matching their true risk level. Audits help create a fair system where low-risk and high-risk policyholders respectively pay lower and higher rates corresponding to real-world exposures.

Why Do Premium Audits Matter?

For several important reasons, businesses must actively cooperate with premium audits. Not doing so could result in unwanted premium increases, penalties, or other unfavorable outcomes down the road.

Completing audits accurately establishes the proper premium for workman's comp coverage going forward. It also ensures businesses neither overpay or underpay for insurance proportional to actual operational hazards. Coverage and rates are then calibrated accordingly.

What to Expect During an Audit

Businesses can expect their insurance carriers to request documentation verifying payrolls, such as quarterly tax forms, payroll journals, or lists of subcontractors. Records should be organized and easy to access. Carriers may conduct on-site audits where representatives visit locations investigating job duties and operations firsthand.

Most carriers now also offer online, remote audits for greater convenience. The audit process serves to fairly match business activities with suitable classification codes and premiums.

Preparing for a Smooth Audit Experience

To simplify the audit process, businesses should retain detailed payroll records in an organized, audit-ready manner. They must also report all subcontractors and temporary workers. Proactively consulting carriers about operational changes prevents misunderstandings.

Finally, addressing any discrepancies found cooperatively helps resolve issues smoothly and solidifies an accurate basis for ongoing coverage terms and costs. Aim for transparency throughout to build trust while gaining premium fairness.

What Is a Premium Audit? In Conclusion

Understanding the purpose and process of premium audits is important for businesses and their workman's compensation needs. By properly managing records and cooperating with audits, policyholders can feel confident secure coverage is fairly priced according to real risks. This maintains an honest system delivering suitable protection for employees alongside sustainable protection costs. Overall, premium audits create a win-win for insurers and insured employees alike.

 

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