Understanding a Workers Compensation Audit

Most Workers Compensation (WC) policies are subject to audit. Workers Compensation Insurance is an insurance program that provides wage coverage if a worker is injured at work or on the job.

Employers pay bonuses for approved programs, which are paid to injured workers upon legitimate claims. The insurance company will review your employer’s insurance to make sure it meets the necessary requirements. He can conduct various types of exams. Each state determines the extent of benefits required within its borders.

Estimated Policy Premium

Workers Compensation Audit are calculated by multiplying the payslip by the rate and dividing the result by 100. Suppose your salary is $500,000 and your rate is $0.10. Your bounty is 500,000 x 0.1/100 or $500.

The premium to be paid at the beginning of the insurance period is a provisional amount. This is an estimate based on next year’s payslip forecast. When the policy expires, the insurance company conducts an audit to determine the actual payslip for the year. The insurance company will then adjust the premium. If your actual salary exceeds your estimated salary, you may be charged additional premiums. If your actual salary is less than your projected salary, you may be eligible for reimbursement benefits.

Purpose of Audit

Audits are conducted to ensure that premiums paid by employers for workers’ compensation insurance accurately reflect their risks. Insurance companies check that employers are properly classified and that payslips used for evaluation are accurate. Employers may pay too much or too little for workers’ compensation insurance compared to other employers if their insurance includes incorrect classifications or payslips.

Many states require insurance companies to review all workers’ compensation policies with estimated annual premiums above a certain threshold (such as $10,000). State insurance agencies conduct regular inspections to ensure insurance companies are performing the necessary checks.

Contractual Obligation

Most Workers Compensation Audit, including NCCI standard forms, contain a provision for audits. On NCCI Forms, this provision is included in the Part 5 Premium. It states that the employer must allow the insurance company to inspect the insurance policy at any time within three years after the policy expires. The insurance company reserves the right to inspect all documents related to the insurance contract. This may include books of accounts, tax returns, payslips, etc.

The Industrial Accident Compensation Guidelines also include provisions regarding inspections. On NCCI Forms, this provision is based on Part 6, Conditions. This gives insurance companies the right to inspect employers’ workplaces at any time. The purpose of such inspections is to assess a company’s insurance coverage and gather salary information. Work accident inspections are not intended as safety inspections.

An insurance contract is a legal contract. If you have workers’ compensation insurance, you are contractually obligated to comply with the testing and inspection requirements contained in your policy. If your insurance company asks you to visit the facility or request updated salary information, you must comply with the request. Otherwise, you may be in breach of contract. The insurance company may terminate the contract or refuse to renew it upon your refusal. This can negatively impact experience fixes.

Types of Workers Compensation Audit

There are different types of occupational injury assessments. The types of exams available may vary from state to state and from insurance company to insurance company.

Mail Audit

The simplest type of test. Email audits may be acceptable for smaller employers that don’t generate much of a premium. However, employers in certain occupations (such as roofers), regardless of size, may not be able to conduct a postal audit.

Preliminary Audit

This is done when you purchase your first policy with a new insurance company. Preliminary tests are usually carried out on-site. Its purpose is to ensure that the policy uses the correct taxonomy and payslip.

Telephone Audit

Used by some insurance companies. Your insurance company will send you a form to fill out and return to your insurance company. Once the insurance company receives the information, it will set up a phone interview with your accountant to discuss the information you provided.

Field Audit

A physical examination performed at your location. Its purpose is to collect payslips and other information that insurance companies use to calculate final premiums.

Interim Audit

You can do it when there is some change in your business, such as starting a new business. Interim audits are also used by large employers who want to report payslips monthly or quarterly instead of his once a year. These audits are usually done by mail. A physical examination will be conducted at the end of the contract period.

Test Audit

Conducted by state Workers' Compensation Audit agencies to verify audit results obtained by insurers. State agencies conduct test audits to ensure that insurance inspectors are properly applying the classification and grading system. The Department also wants to ensure that insurers use Department-approved rating plans (where prior approval is required).

Fraud by an Employer

As a policyholder, you are not only obligated to comply with your insurance company’s information requests. You must also provide accurate information. If you knowingly provide false information to an insurance company, you may be prosecuted by your state insurance agent for insurance fraud. Examples of behavior that may be considered fraud include:

• Underreporting your payroll with the intent to reduce your premium
• Providing false job descriptions to an insurance auditor
• Providing phony tax returns or other financial reports
• Concealing the fact that you have hired subcontractors
• Providing falsified certificates of insurance for subcontractors

Once the audit is complete, the insurance company will send you a report. Ideally, the payslips you see on the report will not differ significantly from the estimated payslips shown on your insurance policy. Unfortunately, this is not always the case. If your salary forecast is too low, the audit may have resulted in a large additional premium. Audit reports may also indicate classification changes. New class codes may be added or existing class codes may be removed if the examiner discovers that your company has been misclassified.

Worker’s Compensation Audit Disputes

Policyholders do not always agree with inspection reports. Reports may contain errors. Wrong Experience Qualifier or Wrong Payroll. Alternatively, you may see classification changes that you do not agree with.

If you are unsatisfied with the test results, contact your insurance company immediately. Most insurance companies provide instructions on how to contest the exam. These may be included in insurance documents. Be sure to follow the instructions of your insurance company.

Submit your complaint in writing within the deadline specified by the insurance company. Please describe your problem in detail. For example, if you think the reviewer used the wrong classification, explain why and suggest an alternative. The insurance company will investigate your complaint and determine if an appeal is warranted.

If you have incurred additional premiums as a result of your exam and you have disputed your exam results, your obligation to pay the additional premiums must be suspended until the dispute is resolved. If the insurer does not resolve the issue to your satisfaction, you can appeal the insurer’s decision to the state Workers Compensation Audit Board.