INSURANCE NEWS & INSIGHTS

Workers’ Compensation policies frequently begin with estimated annual payroll. Example: Estimated payroll: $200,000 Actual year-end payroll: $300,000 The insurance company may charge additional premium after audit based on the additional exposure. If actual payroll is lower, the policy may produce a credit, subject to policy terms and minimum premiums.

Many commercial insurance policies are auditable. Common auditable policies include: Workers’ Compensation General Liability Certain contractor policies The insurance company may request actual information after the policy expires. Audit documents may include: Payroll reports Quarterly tax reports Profit & Loss statement General ledger Sales Subcontractor expenses Certificates of Insurance Officer information Employee classifications

An additional audit premium may result from: Higher payroll Higher sales Additional employees Uninsured subcontractors Incorrect original classifications New business operations Higher subcontractor costs Missing Certificates of Insurance It does not necessarily mean the insurer changed your original rate. The insurer may simply be adjusting the premium to reflect the actual exposure.

Failure to complete a required audit can create additional problems. Depending on the policy and insurance company, consequences may include: Estimated audit premium Large additional bill Collection activity Cancellation Nonrenewal Difficulty obtaining future coverage If you disagree with an audit, request the audit worksheet and review the calculations carefully.

Commercial insurance companies frequently request Loss Runs. A loss run is a report showing the business’s insurance claim history. It may include: Date of loss Type of claim Amount paid Amount reserved Open claims Closed claims Carriers commonly ask for multiple years of loss history.

Insurance companies look at: Claim Frequency How often claims happen. Claim Severity How expensive the claims are. Loss history can influence: Eligibility Premium Deductibles Coverage restrictions Available insurance companies Underwriting approval A business with repeated similar claims may be viewed as having an unresolved risk-management problem.

There is no single pricing formula for all businesses. Depending on the type of coverage, insurers may consider: Annual sales Payroll Number of employees Square footage Property values Equipment values Type of business Years in business Claims history Location Building construction Fire protection Security systems Customer traffic Products sold Services performed Subcontractors Professional services Business…

Insurance companies classify businesses according to what they actually do. A business classified as: Accountant Retail store Restaurant Medical office Beauty salon Contractor Manufacturer Consulting company Warehouse Property manager will not necessarily be rated the same way. Always disclose the full scope of operations. A policy written for one type of business should not automatically…

Contact your insurance agent when the business changes. Examples include: New location New service New product Additional employees Major payroll increase Major revenue increase New equipment New building New tenant New subcontractors New business vehicles An insurance policy should reflect the business as it actually operates.

Businesses are frequently asked to provide a Certificate of Insurance. A COI generally provides evidence that certain insurance existed when the certificate was issued. It may show: General Liability Workers’ Compensation Commercial Auto Umbrella Property Other coverage Important A Certificate is not the actual policy. It does not automatically change coverage.