Topics: Agent Resources
The premium audit is a very important function. Not only does it determine the final premium for an insurance policy, but the data collected at audit (payrolls, class codes and claims data) is later submitted to rating organizations (NCCI and independent bureaus) to be used in developing experience modifiers and loss costs. It is paramount that the premium audit is accurate, verified, and in compliance with mandated rules and regulations.
In this article, we’ll discuss the following:
To help assist your discussion with the insured for simplifying the audit process, we offer the following tips:
Be prepared. The auditor will need access to the insured’s records, and depending on the type of coverage being audited, these records may include: payroll reports, overtime earnings, 941s, state unemployment reports, general ledgers and certificates of insurance if they sublet any of their operations. Instruct the insured to compile the applicable financial records and put together a complete and organized audit file prior to the visit. Have all information accessible and readily available.
Designate a knowledgeable staff member to work with the auditor. Inform the insured to choose a representative of the company who is familiar with the financial records and the daily operations of the business. For example, workers’ compensation policies are based on designating employees to their proper classification. It is imperative that the insured’s audit contact is knowledgeable on the specific job duties of employees and that contact is able to assist the auditor with any questions.
Encourage the insured to ask questions during the audit. Suggest to insureds that they ask the auditor to clarify anything they do not understand.
Counsel the insured to conduct a final review with the auditor. At the conclusion of the audit, the insured should review the auditor’s findings. This is also known as the exit interview, and the insured’s representative and the auditor should recap the audit results to ensure that they are accurate.
So the next time an insured calls with questions about the premium audit process, you can advise them that being prepared, having records readily available, designating the appropriate audit contact, and working closely with the auditor can help avoid some of the common mistakes and pitfalls that can result in an inefficient or ineffective audit experience.
This material is for informational purposes only and is not legal, tax or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is accurate, appropriate or suitable for any specific business, tax or legal purpose. Readers seeking resolution of specific questions should consult their business, tax and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.