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Premium Audit

You should only pay for the coverage you need. Our premium audit process adjusts your policy based on your actual business results, ensuring a fair and accurate earned premium.

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What Is a Premium Audit?

A premium audit is conducted after the end of a policy period to determine the final premium for your business insurance. Contrary to popular belief, an audit doesn’t always result in a higher premium. In fact, it could lead to a reduction and money back in your pocket.

The initial premium you paid was based on an estimate of your exposures, such as payroll, gross sales, and subcontract costs. During the premium audit process, we work closely with you to gather the necessary information to ensure your premium represents your actual business results. This process is especially important for businesses with insurance needs that fluctuate throughout the year or year-to-year.

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What You Need to Know

Preparing for Your Audit

Within 15 business days of your policy’s expiration date, you will be notified by Westfield or one of our independent audit agencies about your upcoming audit. The auditor will request business records to calculate the actual earned premium for your policy term. Here’s a quick look at some of the information you will need to provide. 

General Information:

  • Description of company operations and legal entities
  • Officers/Owners names, titles, and percentage of ownership
  • Employee names, titles, and job duties
  • Number of employees at each location

Payroll Information:

  • Payroll journals/registers
  • Cash disbursement journal
  • Check register
Types of Audits

What to Expect During Your Audit

The audit process varies based on your business profile and specific needs. Your audit notification will outline the method that will be used. Here’s what you can expect for each type of audit.

Mail-Form

You’ll receive a premium audit form that includes a series of questions relative to your type of business and policy. You must complete the form and return it to Westfield via mail, fax, or email.

Telephone

An auditor will call to discuss your operations and review your financial records. You may receive a questionnaire before your scheduled appointment to help you prepare for the audit.

Hybrid

An auditor will contact you to conduct the audit over the phone. Prior to the appointment, you must provide necessary financial records, which will be reviewed and discussed during the call.

Physical

A field auditor will schedule an appointment to visit your premises, where they will inquire about your operations and physically review your financial records.

What to Expect After Your Audit

Audit results typically take up to 15 business days to process. Once finalized, your billing account will be updated, resulting in either an audit bill for any additional premium owed or a refund. Refunds are first applied to any outstanding balance on your account. If no balance remains, a refund check will be issued to you.

After the audit is processed, your auditor may reach out to explain the results and address any questions you have.


Why Is a Premium Audit Required?

When your policy was initially written, the premium was based on estimates, such as payroll, sales, and labor costs, provided to your agent. Since these factors can fluctuate during the policy term, a premium audit is necessary to account for those changes and accurately calculate your premium.

To help minimize surprises at the time of the audit, it’s important to keep your agent informed of any significant changes to your business throughout the year. 

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Questions? 

Contact Our Team Today 

We’re here to help! For questions related to the premium audit process, call 330.887.0106. For questions related to audit billing, call 800.243.0210, option 2.

Please have your policy number ready so we can properly assist you.

Premium Audit

Frequently Asked Questions

A premium audit is required for all workers’ compensation policyholders and many other business insurance policyholders. Completing a premium audit enables you to:

  • Pay the correct premium for the coverage you receive
  • Understand the proper classification for your type of risk and business
  • More accurately predict annual premium

Audit results, along with other policy data, are reported to state rating bureaus to support accurate loss cost development and experience modifications for your business. Failure to comply with the request for a premium audit may result in an audit non-compliance charge, an estimated audit, and/or cancellation of your policy in accordance with applicable law in your state.

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 April 18 to April 18 should be supported by records from May 1 to April 30.

If proper records are maintained, payroll splits are allowed in some cases. However, splitting payroll based on percentages or estimates is not permitted.

No, pay for employee holidays and vacation time cannot be excluded as they are part of your gross payroll.

In most states, corporate officers can be excluded from workers’ compensation coverage by having the appropriate officer exclusion endorsement in place when the policy is issued. The ability to exclude owners, partners, or members depends on your state’s regulations. Your auditor can provide the specific rules that apply to your state.

When a job site supervisor or foreman has direct control of the work being performed, they are 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 contractor’s 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, so we require this form to be filled out each year.

Yes, you can request to revise an estimated audit. Please contact the premium audit department by calling 330.887.0106 or emailing westfieldpad@westfieldgrp.com.

No. All revisions are completed from our home office after we receive the appropriate supporting documents. 

Additional documentation can help support the figures you have provided during the revision process. 

You can mail, call, or email the premium audit department using the contact information below: 

Westfield Insurance

Attn: Premium Audit Dept.

One Park Circle

Westfield Center, Ohio 44251

330.887.0106 

westfieldpad@westfieldgrp.com

Please make sure you have your business name and policy number ready so we can properly assist you.

 

Premium Audit

Glossary of Terms

An audit noncompliance charge is a fee levied on the policy when the policyholder does not allow the carrier to complete the audit. This charge could be up to a 200% increase in some states. 

The exposure is the amount of payroll, sales, costs, or other basis which rates are applied to determine the premium. The estimated exposure is value projected for the policy term.

When an employee performs duties across different classifications.

Transactions between two or more legal entities on the same general liability policy.

For workers’ compensation, the premium basis is always payroll. General liability premium basis can include payroll, sales, costs, units, gallons admissions, or each.

  • Payroll: Remuneration means either money or substitutes for money. Payroll can include wages, bonuses, holiday pay, sick pay, commissions, overtime pay, vacation pay, and payment for piece work.
  • Sales: The total amount charged by you to others for all goods or products sold or distributed and all operations performed by you for others. This includes cash or trade discounts. However, it does not include sales or excise taxes collected and submitted to government entities, credits for returned products, and freight/delivery charges if these are charged as a separate item on the customer’s invoice.
  • Costs: The total amount paid to another organization for the cost of all labor, materials, and equipment furnished used in the execution of work they were hired to perform. 
  • Gallons: The total number of gallons sold to customers.
  • Admissions: The total number of persons, other than working employees of the named policyholder, admitted to the event or events. This basis of premium will include all event attendees whether on paid admissions, tickets, complimentary tickets, or passes.
  • Each: The number or each unit of exposure as noted in the classification footnote, such as “per person” or “per event.”

The compensation for hours worked at an increased rate of pay. The premium overtime is the amount paid over the base pay.

Standard exceptions refer to workers’ compensation class codes used for clerical office employees, clerical office telecommuters, drivers, outside salespeople, and automobile salespersons.

An auditor will look to understand the financial exposures of your company. Typically, source documents are required and reconciled against verification documents, which include but are not limited to:

  • Payroll: Federal Quarterly Tax Reports (941’s), State Quarterly Tax Reports (state unemployment)
  • Sales: Income statements, sales tax returns
  • Costs: Tax Form 1096, Income/Profit and Loss Statements, Tax Returns (Schedule A or Schedule C)

Insurance programs for large construction projects that can include the project owner, general contractors, and enrolled contractors/subcontractors working on a named project.