Insurance Audits

Those words tend to make business owners very uncomfortable. I think it has more
to do with the AUDIT part of it.

If you have Liability or Workers compensation insurance you will eventually be

contacted by an insurance auditor hired by the insurance company to conduct an
audit.

An insurance audit is basically a “checking of the facts” about your business.

When your policy was issued, your premium was based on your estimate of variable
rating information, such as payroll or sales. An insurance audit is performed to
determine what the actual premium should be based on your company's actual
results.
This guarantees you have the proper amount of coverage in the event of an
incident.

There are 3 types of audits and you may end up doing 1 type or all 3 over the
course of your business life:

The first two types are basically the same, Phone or Mail-in.

Both of these types of audits consist of a form being sent to you for you to fill
out with the pertinent information and then sending this information, and any
verification sources, back to the auditor for processing and review.
In the case of a phone audit, the auditor generally requests an appt to go over
the audit with you by phone. The auditor uses this call to clarify any items that
require more detail.

The third type is the one that most people dread- The Physical audit.
This type requires you to set and confirm an appt for an auditor to come to your
place of business or to your accountant’s office. The audit can take anywhere from
30 minutes to several hours depending on the size of your company, # of employees
and how well you have prepared your books.
When scheduling the appointment, the auditor will provide you with a list of the
documentation you will need to have ready for the audit.
Some items you may be asked to provide:

• Payroll records with overtime separated

• Job titles and descriptions
• Listing of corporate officers
• Subcontractor costs
• Subcontractor Certificates of Insurance
• Sales receipts
• Quarterly Federal and State filings
• Automobile information

The auditor then goes through all records and inputs the information into a
software program (Auditors usually carry a laptop).

At this point you may be asked some questions. If you are unable to physically be
at the audit be sure the person who is there can answer most, if not all,
questions. Also be sure to provide a day and time the auditor can call you later
to clarify any missing info.
Possible questions:

• In detail, what does your company do?

• Again in detail, what does each employee do?
• Commercial work or residential? Or both?
• What are your hours/days of operation?

When the auditor is done they should review the findings with you and may ask for
you to sign a statement confirming they have done so.
Many auditors (if applicable) will advise you on how to better prepare for next
year.
Once the auditor leaves the audit they will then re-review the information
provided and double-check for spelling errors, etc. the audit is submitted for
review and processing to your Insurance carrier. It can take anywhere from a few
days to several weeks before you will find out the final results from your
insurance company.
If you have questions during this waiting period, you should direct them ONLY to
your insurance agent or broker. The auditor has no control or information about
your audit once it is submitted for review.
Some helpful hints:
• Please remember, the auditor is an information gatherer only. They have no
control over your account.
• They are just doing their job- be courteous and helpful
• Do not lie to the auditor- they may not catch it but someone down the line
will and then you can be fined and/or canceled.
• If you repeatedly ignore appointment requests or continuously confirm, then
cancel, appointments the auditor will be forced to file a Non-compliance report.
In this case generally the insurance company will send you a premium bill that
includes a hike of up to 30%. Save everyone the time and irritation, just make and
keep the appointment.

Don’t let the audit process stress you out. The auditor wants to make things as
easy as possible for you as it makes their job easier as well.