Frequently Asked Premium Audit Questions
Premium audit is a partnership and a process in which we work with you to obtain the information needed to determine the final premium for your policy after the term expires. The premium you paid for your policy was based on estimated exposures such as payroll, sales, and/or subcontract costs. Premium audits are conducted to ensure an accurate final premium for the policy period based on your actual business results.
A premium audit is a standard insurance practice which allows us to account for changes in the variable exposures used to calculate your policy premium. When your policy was written through your agent, the deposit premium was based on estimates provided to our underwriter. These estimates (payroll, sales, labor costs) can fluctuate during the policy term. The audit will help determine the actual exposures and classifications for the policy period.
A premium audit is required of all Workers Compensation and many other business policies. The audit is based on the time your policy was in force. The results of your audit are reported among other policy data to state rating bureaus to support accurate loss cost development and experience modifications for your business.
Premium audits enable customers to:
- Pay the correct premium for their coverage
- Understand the proper classification for their type of risk/business
- More accurately predict annual premium
Note, failure to comply with the request for a premium audit may result in an audit non-compliance charge, an estimated audit and/or cancelation of your policy.
Understanding your business and operations is fundamental to ensuring your policy meets your coverage needs. It is not uncommon for businesses to change which could impact how your policy is rated. Providing a detailed description of your operations is one way you and your auditor can ensure proper classifications are being applied to your policy.
Audits are conducted for the policy period or to the nearest month of your policy term. For example, an annual policy from 4/18 to 4/18 should be supported by records from 5/1 to 4/30.
In some cases, payroll splits are allowed if proper records are maintained. Please note that splitting payroll based on percentages or estimates is not permitted.
Pay for holidays and vacation are not excluded and are part of the employee’s gross payroll.
In most states, corporate officers are included, but can be excluded from coverage by having the appropriate officer exclusion endorsement added when the policy is issued.
Owners, partners or members of an LLC may or may not be included depending on state rules.
Your auditor can provide you with your state’s rule.
When a job site supervisor (or foreman) has direct control of the work being performed, he/she is included in the governing class code. Their level of authority and the instructions given to employees poses a liability risk.
Executive supervisors are employees who have administrative or managerial responsibility for construction projects and will exercise supervisory control of the jobs through foremen or job superintendents. This classification would not apply to anyone who is directly in charge of daily construction activities or who engages in construction activities.
An independent contractors form asks various questions to help us determine if there is an employer-employee relationship with the person or contractor you hired. Circumstances may change from year to year, thus we require this form to be filled out each year.
After completing your audit, we will process the results and an audit statement will be sent to your agent. Your agent will ensure you receive a copy of your audit results. Within 15 days of your audit being processed; our billing department will issue a credit to your current policy or if you owe additional premium will send a billing statement. Your current policy term may be updated to reflect the audit results.
I received an estimated audit, can I request an audit to have this revised?
- Yes, please contact the Premium Audit department.
Can you send an auditor out to complete a revision audit?
- All revisions are completed from our Home Office after we receive the appropriate supporting documents. If you have any specific audit questions please reach out to your auditor or contact Westfield Premium Audit.
Why do I need to send in additional documentation and reports to have my audit revised?
Additional documentation will help support and facilitate your audit revision request. All documentation should be accompanied by accounting records which support the figures you provide.