Here is How to Best Prepare your Businesses for a Workers Compensation Audit.
At the end of each insurance term, a workers compensation audit takes place for all businesses. For most businesses this is a straight forward process. Depending upon the size and scope of a business, the audit can be difficult. The first step to a smooth process is during the actual purchasing of insurance a year prior. Taking an adequate amount of time to talk with your agent about the intricacies of the business is always the best way to start the insurance term off on good footing. Partnering with an independent insurance agent can make this process a bit smoother because they act as a true middleman and not a representative of the insurance carrier. They can tell you what the pros and cons of each carrier are. This can help throughout the year and especially during the audit process. Here are five ways to ensure this process goes off with out any hitches.
Communicate with your Agent
Establishing open communication lines with your insurance agent is always a good idea. You do not have to talk to them frequently. When you are purchasing coverage, filing a claim, changing something regarding your policies, or preparing for an audit; it is a good time to not rush through the conversation. Taking an adequate amount of time to notify your agent of any situation relating to your business (especially changes to the business that might impact your insurance policies) is the best way to operate. It may be helpful to set expectations when you purchase insurance. Ask your agent about their preferred method of communication and the time period you can expect them to get back to you within. The more proactive you are in communicating with everyone involved in the insurance process the better.
Have Paperwork in Order
Having all necessary paperwork ready to go in advance of an audit will make the process move much more smooth. Your agent should be able to help you prepare for this process. Most carriers have a list of documents that will be needed for an end of term audit. Some common things needed are payroll records, accurate job descriptions, and the hours worked for each employee need to be prepared in hourly, weekly, and yearly numbers. The more detail the better.
Payment and Disbursement Records
Accurate records of all payments made to the carrier and any disbursements made back to the business need to be included in the audit. Not having these numbers available gives an auditor a reason to dig deeper into other aspects of your business. It is always the best policy to be open, honest, and organized from the beginning of the audit.
Certificates of Insurance
It is equally important to have a detailed list of all certificates of insurance issued and all of the subcontractors and general contractors involved. The main reason for providing documentation of certificates is to make sure these contractors are not listed as employees. Some states consider some types of contractors to be employees unless otherwise stated. This can drastically impact premium payments.
Experience Modification Worksheet
The experience modification worksheet is a document published yearly with the state governing body within the state a business operates. This worksheet includes the loss history for your business during the past three insurance terms not including the most recent term. The current term is not included because some claims may not be closed from the past year. If the business has had a large number of claims or a large amount of small claims this worksheet will show the true loss history. This can help the carrier determine how much of a risk your business actually is.
An quick and accurate workers compensation audit is always in the best interest of a business. The auditing process can be extremely frustrating without preparation, but like many things in life it is better to do things right the first time. This is never more true then during a workers compensation audit. Setting up your insurance relationships in the first place and monitoring them throughout the year, can save a lot of heartache during the auditing process.