When an insurance company audits your business, it means they are reviewing your payroll records and job classifications to ensure you have paid the correct workers’ compensation premium. These audits are a standard part of workers’ comp policies and help prevent overpayment or underpayment of premiums.
Workers’ compensation insurance premiums are initially based on estimated payroll figures provided at the start of a policy term. However, payroll can fluctuate due to business growth, staff changes, or shifts in job roles. To ensure the premium accurately reflects actual risk exposure, insurers conduct an audit at the end of the policy period.
An insurance audit typically involves the following steps:
If the audit reveals that employees were misclassified or payroll was underreported, the business may owe additional premiums. In some cases, significant underreporting can result in penalties or legal action. Conversely, if the business overpaid, the insurer may issue a refund or credit toward future premiums.
To ensure a smooth audit process, businesses should:
Being audited by an insurance company is a routine process designed to ensure fair premium payments based on actual payroll and job classifications. By keeping accurate records and understanding the audit process, businesses can avoid surprises and ensure compliance with workers’ comp insurance requirements.