Audits are usually common with all workers’ compensation policies, many liability policies and some marine policies as well. If your company is in possession of business insurance, your audit insurance company is likely to conduct an audit.
Audits are done to make certain that the amount of premium they are charging you is inline with the amount of coverage that they are offering. Usually when an audit is about to happen, the insurance company will let you know by phone first and give you a grace period of about two weeks to prepare. Also the auditor will alert you prior to the audit on the documents they will be examining so that you can prepare them. If there are any cases of fraud that may be discovered by the auditor, then they will report it to the insurance company who will then hand the complaint to the appropriate investigative unit of your state.
According to a recent research, most non-public audit claims are as a result of technical standard violations, and failure to include appropriate disclosures in the face of financial statement. This article provides some tips on how to get prepared for an audit.
Have All Requested Documents Available
When you sign up for an insurance policy there is usually likelihood that there is a clause stating that once you purchase the policy then you are agreeing to the audit process. Therefore once an auditor requests access to certain records you have to avail them. If there are records that are required and are not in your possession like maybe at the accountant’s, either make them available at your office or prepare the accountant’s office for the audit to be done there.
Have certificates of insurance on any contactors not covered and discuss book keeping
If there are any contractors that are not covered by your workers’ compensation policy, then you have to have certificates on their insurance. This way you will not attract additional premiums based on those labor costs. Also discuss record keeping with your audit insurance company because with proper book keeping, you may be able to minimize your workers’ compensation premiums.
Why Audits Are Important
Normally, insurance policies are rated on the basis of different metrics many of which people don’t know at the beginning of the policy term. For instance, if you have a company that generates an income of about one million, it’s likely you may tell your broker that your business does half a million only and may attract a one-year break in your insurance costs. It’s the audits that will keep your honesty in check though. Also in the event that your business also comes below what you expect, many policies have a provision for return premiums under such situations. That is why it’s also recommended that you have to discuss the projected revenues and payroll with your audit insurance company.
With the above tips, you will be ready for an audit the right way and will not be caught off-guard.