If you’ve been told your company is going to do a workers’ compensation audit, you’re probably scratching your head, wondering whether this is necessary. After all, if you already have workers’ compensation insurance, why would you need to go through an audit? While in years past, companies may or may not have done an end-of-year audit depending on your class of business, now, it is almost always mandatory.
Worker’s compensation insurance is a complex type of coverage. It’s also one of the most regulated types of business insurance because it’s designed to protect both the organization and its employees. This necessary type of insurance also pays for various injuries and incidental fees, including medical expenses, legal costs, and paychecks due to a loss of work.
Missouri businesses in the construction field must carry workers’ compensation insurance if they have one employee. All other businesses will be required to carry work comp if they have five or more employees. Here’s what you need to know if you’re approached about this type of audit.
What is a Workers’ Compensation Audit?
A workers’ compensation audit is typically conducted each year to ensure that your business pays the right premiums for your workers’ compensation insurance. Auditors can review your end-of-year records in various ways, including by mail, phone, or in person.
During the audit, you’ll need to show your payroll and other records that were asked for when you first received your workers’ compensation insurance. The auditor looks at these records to determine the scope of work performed while insured and compares it to what was projected when you received your workers’ compensation insurance.
In addition, the auditor may look at your subcontractors to determine if they’re self-insured. If not, you could be charged extra to insure your subcontractors.
What Happens During a Workers’ Compensation Audit?
The workers’ compensation audit process is typically straightforward because it often follows the same method you went through when obtaining your insurance.
You’ll be contacted by phone when it’s time for your audit. This usually happens on the one-year anniversary of having the workers’ compensation insurance. You’ll be told which forms you need to fill out and any supplementary documentation you’ll need to have on hand.
After submitting all of the required paperwork, the auditor will compare what happened in your business over the last year and what you projected when you first received your insurance.
Once done, the auditor will let you know about any adjustments needed to your premium. You’ll also receive a summary of the audit with your results so that you can make any necessary updates on your end.
What Can You Expect After Your Workers’ Compensation Audit?
Several things can happen after your audit.
- If your risk assessment has remained the same, there could be no changes to your policy.
- You could have your premium lowered if you have also reduced your risk.
- You could have your premium increased if the insurance provider deems that your risk exposure or payroll is now higher than when you received your policy.
It’s not uncommon to have a premium change. Changes typically occur when you expand your business, hire more employees, or if you decrease your payroll. In addition, if the job responsibilities for your team shift, your workers’ compensation insurance premiums could also shift.
If you recently went through a workers’ compensation audit and are not happy with your premium, we might be able to help. Contact us to get a free proposal. We’ll analyze what you’re paying now and see if we can save you money with another carrier on this critical coverage.