Policies are audited to ensure that the premium charged by the insurance company reflects their actual exposure, which was estimated at policy inception.
Insurance audits are performed by employees of the insurance company or independent auditors hired by the insurance company; in some cases forms will be sent to the business for a 'self audit' process. In all cases, the business must prepare information and utilize the time of its employees to respond to the audit. The level of personnel required varies based on the company's size. Personnel required might include the Office Manager, Accounting Manager, Controller or external CPAs. Data is collected and provided to the insurance auditor by the company personnel.
What is the auditor looking for?
Insurance companies audit certain Liability policies and ALL Workers' Compensation policies. The audits collect exposure information estimated when the policy was written and compares it to the actuals. This data is then used for determining and adjusting premium amounts. Information typically (though not exclusively) required includes the following:
* Liability Policies Gross company sales Independent contractor costs (insured and uninsured) Payroll for certain types of exposures
* Workers' Compensation Policies Actual employee payroll Cost of independent contractors if no certificate or proof of other coverage is provided
This information may be in the form of payroll records, Federal Form 941, Financial Statements, Check Registers and Certificates of Insurance from contractors/vendors. A company's use of contractors can be determined by information disclosed in the financials or check register. Contractors/Vendors that do not have valid insurance certificates proving independent coverage will be added to the company's exposure totals. Not only do the possibly uninsured contractors/vendors increase a company's exposure to loss, they can also cause significant increases in their premiums.
What makes for a 'good audit' experience?
The main requirement for a 'good audit' experience is having all the information requested readily available for the auditor when they arrive on the premises. This includes easy access to contractor certificates of insurance demonstrating that the coverage is current and meets required limit levels. The upfront preparation and organization by the company can prevent ongoing audit responses and adjustments later on. Another 'good audit' experience is no surprises such as large premium adjustments, amounts due or returns after the audit is complete.
What makes for a 'bad audit' experience?
If the company cannot readily access the requested data, a variety of unwanted events can occur including:
Excessive waste of time for the auditor and company personnel Company (Policy holder) gets a bill for a large additional premium for the audit period and next period Company must immediately contact contractors requesting certificates and forward to auditor for premium adjustments, requiring significant time for both parties.
What are the potential consequences of a bad audit?
The results of a bad audit can be severe, especially if the audit resulted in additional premiums. Policies may be cancelled due to non-payment of the additional premium or for non-cooperation in the audit process. The company could have their credit affected. Staff will need to dedicate additional time to correct or adjust audit discrepancies, resulting in lost productivity and a disruption of the work routine. An insurance company could cancel the easy 'self audit' process and insist on 'in person' audits.
How do you avoid a 'bad audit' experience?
Two words - be prepared. Understand what is auditable and what the audits are based on. Have the requested financial information available for the auditor. Present up-to-date insurance certificates for all vendors and contractors indicating limits meet requirements and coverage dates are current. Be sure the certificates are tracked and kept up to date. The best way to manage contractor certificates is by maintaining an automated certificate tracking system that provides policy expiration notices and allows you to attach images of the certificate for quick access during the audit, helping to avoid unnecessary adjustments to the premium. Automated systems - notably insurance and vendor tracking software - are available on the market to help in this process.
To survive your insurance audit, make sure you know what the auditor wants in advance, collect and organize the information and be ready to find additional data quickly. Avoid the pitfalls and surprises of the 'bad audit' experience!
Most workers injured on the job in Missouri are familiar with the idea that they are entitled to some benefits under the Worker's Compensation system. However, most workers do not know the details of those benefits and their employer often does little to inform them of their rights. Employer's are required by state law to post notices listing employee's rights, but few do. Truthfully, the Missouri Worker's Compensation system is very complex. It is best to at least consult, if not retain, a Worker's Compensation attorney.
Generally, there are three main benefits under the system. The first benefit is medical treatment. If an employee is injured at work, they are entitled to receive free medical care for that injury. However, the law gives the employer, and more practically their Workers' Compensation insurance carrier, the right to choose which doctor will provide the treatment. Sometimes, injured workers decide to go to their own doctor and submit payment to their private health insurance carrier. The problem that often results, however, is that virtually every policy of health insurance has an exclusion in which they will not pay for work related injuries. The injured worker does not find out about this until they have already racked up expensive medical bills. Thus, if you are hurt at work, you should notify your employer immediately and request that they provide you with a doctor.
The second benefit that injured workers are entitled to is payment for time off work. This is known as Temporary Total Disability (TTD). In practice, the insurance company will not make payments for time off work unless their doctor writes that the employee is completely unable to work for a temporary time. Yet, Missouri's Workers' Compensation law states that the injured employee is not eligible for this payment until they miss more than three days of work.
The third main benefit under the system is a lump sum settlement called Permanent Partial Disability. Permanent Partial Disability is to compensate the worker for any residual symptoms after treatment has ceased. In all practical terms, every worker who has been treated by a doctor on several occasions should receive a disability settlement.
Many workers often question whether they should hire an attorney, and some elect to go without one. However, a recent study reported in Missouri Lawyers Weekly indicates that injured employees without attorneys received approximately 50% less than those who are represented. Because of 2005 legal reforms, this disparity has increased. Before an unrepresented worker settled their case, it had to be approved by a worker's compensation judge. The judge was allowed to advise the injured employee. However, given the 2005 changes, the judge can no longer utter a word even if they realize the employee is getting a horrible deal.
Both Phyllis Recca & Joshua Myers are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Phyllis Recca has sinced written about articles on various topics from Workers Compensation, computers and the internet and Ad Tracking. GG-One Software provides products to manage insurance certificates and contracts. Learn more by visiting their webite. Implement an automated certificate compliance program today!. Phyllis Recca's top article generates over 4400 views. to your Favourites.
Joshua Myers has sinced written about articles on various topics from Workers Compensation, Auto Insurance and Motorola Cell Phone. Joshua P. Myers, a St. Louis Worker's Compensation Expert, explains the three main benefits of the worker's compensation system. More information can be found at