Many Workers’ Compensation and contractor General Liability policies are auditable policies.
The premium charged at the beginning of the policy term is often a deposit or estimated premium.
After the policy expires, the insurance company requests actual exposure information.
An audit may request:
- Payroll records
- Payroll summaries
- Quarterly payroll reports
- Tax records
- Profit-and-loss statements
- Gross sales
- General ledger
- Subcontractor payments
- Certificates of Insurance
- Cash labor records
- Officer information
The insurer compares actual exposure with the estimates used when the policy was issued.
Why Did I Receive an Additional Audit Bill?
An additional premium does not necessarily mean the insurance company raised the rate.
It may simply mean the actual exposure was higher than originally estimated.
Common reasons include:
- Payroll increased
- Sales increased
- More subcontractors were used
- Additional work classifications were discovered
- Employees performed higher-hazard work
- Certificates of Insurance were missing
- Owners originally excluded became includable
- Business operations changed
Do Not Ignore an Insurance Audit
Ignoring an audit can make the situation worse.
Depending on the policy and insurer, failure to complete an audit may result in:
- Estimated audit premium
- Significant additional premium
- Collection activity
- Policy cancellation or nonrenewal
- Difficulty obtaining future insurance
If you disagree with an audit, request the audit details and review the payroll, classifications, subcontractor information, and calculations.
Illinois employers may submit certain Workers’ Compensation insurance audit disputes to the Illinois Department of Insurance.
Read more:Illinois Department of Insurance — Workers’ Compensation Insurance