How to Prepare for a Workers Compensation Audit

In this hub I'll give you tips and suggestions on how best to prepare for a workers compensation audit. For many business owners this process has never been correctly explained. I'll provide you with a guide that you can use when confronted by an insurance company auditor.

If you feel you need independent professional help with your workers compensation audit, feel you've been overcharged or that your audit included mistakes or errors or just need help with your audit, check with Workers Compensation Consultants, an independent consulting firm that does not sell insurance. I've worked with Workers Compensation Consultants and found them to be very knowledgeable in all aspects of work comp audits.

The first thing you need to know is why an audit is being requested. Workers compensation premium is determined by exposures. The two basic exposures for a workers compensation policy are payroll (remuneration) and cost of uninsured subcontractors. When a workers compensation policy is first set up the premium is based on ESTIMATED exposures, or best guestimates of the future. After the policy expires the actual exposure for the policy period will be determined by the audit. Once the audit is completed the insurance carrier will prepare and send a FINAL AUDIT STATEMENT. This statement will indicate any additional premium you owe or any credit due as determined by the AUDITOR.

So what is the AUDITOR really looking for? The answer is any payroll or any increase in exposure which includes payment to others such as uninsured subcontractors. Keep in mind, the auditor does not work for you, they work for the insurance company. The auditors job is to find all premium producing exposures they can, not to give you advice on how to save premium dollars!

When preparing for a workers compensation audit make available to the auditor ONLY those items they request. DO NOT give or volunteer more information that they ask for. The quicker an auditor can finish the job and move to another audit the better it is for you!

Here's a short list of some of the items you may be requested to provide;

• Employee Records
• Payroll Records
• Cash Disbursements
• Certificates of Insurance
• Detailed description of your business operations

You may be asked for additional information or more detailed information. But remember, do not give more than you are asked!

These tips will help save you time and cut down on some of the errors auditors make. For more hints and tips about workers compensation audits, check with ArticlesAboutWorkersCompensation.com.

• Make sure your payroll records separate any overtime paid to your employees. Be sure to summarize overtime by the work comp job classifications ahead of time as you enter them in your payroll records.
• Be sure to have current CERTIFICATES OF INSURANCE for each subcontractor used during your policy period. When securing certificates make sure they include workers compensation coverage.
• Sometimes a single employee's payroll may be divided over different CLASS CODES. You must keep proper records and they must be kept in dollars, not percentages. This is called PAYROLL SEPARATION. Check to see if your business can qualify for payroll separation.
• Keep the auditors job simple. These folks are on a time schedule. They are given very specific time frames in which to get an audit completed and back to the insurance company. So do what you can do to make their job go smoothly. Here's some suggestions; Be prepared. Don't blow the auditor off and make them have to reschedule, a happy auditor leads to a good audit!; Have all the information the auditor requested organized and ready for use.; Answer basic questions about your business and records. Don't dump this job off to someone else, if you own the business, you need to answer the questions.; Do not volunteer information, just answer what you are asked, no more, no less.; Keep it simple. Do not ask the auditor questions. Remember, they are not there to help you!
• Now a word of caution. Many auditors prefer to just gather data, take it with them and finish it up on their time. This is never good. You should always have the chance to review the final work before they leave so you are aware of how they classed your employees and how the audit will impact your business. You will be asked to sign the auditors worksheets before they leave. NEVER sign an incomplete worksheet. ALWAYS ask for a copy for your files.

The workers compensation audit is a provision found in your insurance policy. It is a contractual obligation, one that you agreed to when you signed up for your policy. Is this something you must comply with? NO. But if you don't comply and cooperate you give the insurance company the option to apply additional actions.

If an audit is not completed, or if you are deemed uncooperative in completing the audit, an insurance company is allowed to use estimated audit figures...and guess what, the insurance company is the one who comes up with the estimate! Is this enforceable? YOU BET!

• Do your best to get the audit finished on time.
• Work with the auditor and get what they need to do their job.
• Make sure you understand the process before it begins!
• Seek professional help when you need it.

Good luck with your audit!

Thanks!