Insurance Audits: It’s not the IRS calling! 

Written by: Wendy Beever, CIC, ARM

Many business owners purchase worker’s compensation insurance and liability insurance policies that are auditable.  This is not an IRS audit, so don’t get concerned!  All worker’s compensation policies and most general liability policies are based on estimates of either annual payrolls or sales.  At the end of the policy term, the insurance company conducts an audit- if the payrolls and/or sales are lower than the estimates provided to the insurance company, the business owner receives a refund.  If the actual payrolls and/or sales are higher, the business owner receives a bill. 

The Dearborn Agency has developed ways of assisting its customers in handling their frustrations with the audit process over a long period of time, 31 years to be exact. To make the experience even better for our clients, I am currently working towards a professional designation as an Associate in Premium Auditing (APA). The education I have received during this process is enabling us to communicate with auditors in their own language to better negotiate accurate audits. Since we have been assisting business owners with their audits for over 3 decades, I thought it was time to share some of our knowledge to make your next audit quick and easy.

Try the following tips prior to your next audit:

  • At your renewal proposal meeting with your agent, discuss the upcoming audit and ask what to expect from your insurance company;
    • Will they do an “actual audit”?
      • This means the agent comes to your place of business and meets with you. 
    • Or will they conduct a “voluntary audit”?
      • This means the agent requests that you forward a questionnaire and payroll records to the insurance company.

*Your agent should be able to advise you as to which type of audit will be completed.*

  • Ask your agent if he/she will meet with the company and do the audit for you.  If not, follow onto the next tip:
    • Provide a copy of your payroll records and duties for each employee of the policy period, to your agent and ask that he/she prepare a pre-audit ahead of the company audit. 
      • This pre-audit will let you know exactly how the audit will be done.