Audits can be confusing, especially when everyone thinks of only IRS audits at this time of year. Unlike the IRS audit, business owners’ insurance audits don’t need to mean bad news! Many times, they are good news to the business owner, but whether the news is good or bad they can seem confusing because they seem to change the price of insurance after the fact.
All worker’s compensation insurance policies and many general liability policies are subject to audit at the end of the policy year. This is because the premiums for these policies are estimated and based on a guess of what payrolls and/or sales WILL BE for the upcoming year. Once the year has ended, the actual payrolls and/or sales are collected and an adjustment (an insurance audit) is made, either billing the insured or issuing a refund depending on whether the figures were higher or lower than the estimates.
As a business owner, you should choose an agent and agency that 1) assists you with your audits; 2) explains the audit processes to you; and 3) reviews your payrolls and sales periodically throughout the year. There is no reason for a business owner to receive an audit with a bill without knowing ahead of time that it is happening.
The Dearborn Agency completes many of its customers audits for them in order to save clients time and to ensure the accuracy of the audit. If you are frustrated with completing your audits, discuss them with your agent and request that they complete it for you.