The Insurance Audit Process
An insurance premium audit will review your business records, such as payroll, sales, and other relevant financial documents, to determine if your current coverage aligns with your actual risk exposure. This evaluation helps to ensure that you are neither over-insured nor under-insured, ultimately saving you money in the long run.
The audit process is typically straightforward and hassle-free. An audit can be conducted as an in-person audit or a self-audit, depending on the risk. Your records will be carefully examined, seeking to identify any discrepancies or potential areas of improvement.
Auditing is Limited to Commercial Policies
It is important to note that insurance premium audits are not applicable to all types of businesses. Personal policies, for instance, are exempt from these audits. However, if you own a business, regardless of its size or industry, you may be subject to an audit. This is because insurance companies need to accurately assess the risks associated with your specific business operations in order to provide you with the most appropriate coverage.
The Benefits of an Insurance Audit
The benefits of an insurance premium audit are twofold. Firstly, it ensures that you are adequately protected against potential risks and liabilities. By reviewing your records, the audit can identify any gaps in your coverage that the underwriter can use to make adjustments to ensure that you have the right amount of insurance for your business needs.
Secondly, an audit can also result in cost savings. If the auditor determines that you have been overpaying for your insurance premiums, adjustments can be made to reduce your future payments. Conversely, if the audit reveals that you have been under-insured, you will need to increase your coverage to better protect your business.
Insurance Audit FAQs
What is a premium audit?
An audit is, essentially, a review. The business’s accounts for the last year are reviewed, for example, Payroll, and then compared to the policy. Workers' Compensation, Commercial Package and General Liability polices are subject to an
audit to ensure there is proper coverage for the exposure, and the premium is accurate.
Are audits required?
It depends on the type of policy. Those that are required to be audited, are required by the policy contract.
What type of policies get audited?
Workers’ Compensation, General Liability, and Commercial Package Policies.
How does an audit happen?
There are two types of audits: 1.) Physical Audit; 2.) Self-Audit.
Physical Audit Lifecycle
Self-Audit Life Cycle
How long do I have to complete a self-audit?
There are many factors that can impact the length of the audit process. However, the general rule is that the business has 30 days to remit the requested information. If the information is not received, a reminder and additional 30 days will be
provided to remit the information.
When does an audit take place?
At the policy expiration date/cancel date.
What happens if I don't do an insurance audit?
The policy is reviewed to determine if a 25%, 15% or 0% increase will be applied. Also, there is potential for Underwriting action to take place.
What are Audit Revisions and why would they occur?
An audit revision is an adjustment being made to the audit. Examples of cause for a revision are an insured is complying with a deliquent audit, there is a dispute in regards to a classification, a certificate of insurance is being provided, or
additional information is being provided.
What happens to the billing during an audit?
When a policy is audited, the current term premium is still due as normal. If confirmed that an audit correction is being made, then the billing department will hold the delinquency only. The invoices will still generate as normal.
What happens if there is a refund from the audit results?
If the audited policy is on its own billing stream the audit refund premium will apply to its own policy first paying down the balance and then any remaining balance will be refunded.
If the audited policy is combined with other lines of
business, the audit refund premium will apply to its own policy first paying down the balance. If there is any remaining credit, it will then apply to the other lines of business. If any credit remaining at the end will result in a refund
check.
What happens if there is additional premium due, after an audit?
If the audit results in additional premium, a new invoice will generate.
If there is still premium due after an audit credit is applied, depending on the billing cycle, then there may not be a new invoice generated.
How do I exclude a subcontractor from a Workers' Compensation policy?
State specific guidelines are as listed below. Note, all documentation must be valid for the full term of the audit period. This may require getting more than one set of documentation.
ILLINOIS
- A Workers’ Compensation certificate of insurance; or
- Sole proprietors (individual entity), partnership, LLC or incorporated entities with no employees can be removed with a signed Independent Contractor Worksheet*
INDIANA
- A Workers’ Compensation certificate of insurance; or
- A State stamped Indiana Workers Compensation Clearance Certificate; or
- Sole proprietors (individual entity) with no employees can be removed with a signed Independent Contractor Worksheet*
IOWA
- As of 1/1/22, Hastings will no longer accept Independent Contractor Worksheets. State specified Non-Election/Rejection forms will be required
- Paper Non-Election/Rejection applications dated prior to 11/1/19 will still be accepted
- Paper Non-Election/Rejection applications dated after 11/1/19 will not be accepted and will need to be filed on the state website to be valid.
MICHIGAN
- A Workers’ Compensation certificate of insurance; or
- A valid state stamped Notice of Exclusion Form (BWC-337); or
- Sole proprietors (individual entity) with no employees can be removed with a signed Independent Contractor Worksheet*
WISCONSIN
- A Workers’ Compensation certificate of insurance; or
- Sole proprietors (individual entity), partnerships, LLC or incorporated entities with no employees can be removed with a signed Wisconsin Nine Point Criteria form covering the audit period. Answers on the form must meet all conditions to be valid.
If the required information is not provided, then the subcontractor will be rated under the class code that covers the exposure for the duties performed by the subcontractor.
What about a General Liability certificate of insurance for subcontractors?
A General Liability certificate of insurance is required to rate subcontractors under the appropriate insured subcontractor classification.
If the required information is not provided, then the subcontractor will be rated under the class code that covers the exposure for the duties performed by the subcontractor.
What happens if the self-audit response is late?
If a response is not received by the initial due date, a second request will be sent with an additional 30 days to complete the audit.
What is the process of a self-audit?
What is the process of physical audit?
What happens after the initial audit is completed?
- Hastings receives the completed audit and the audit department reviews the audit for completeness and accuracy as it pertains to all state (bureau) and Hastings rules
- Additional information will be requested, if needed
- Final audit results are mailed to the insured/agent
- Final audit worksheets are available upon request
For audit inquiries, contact Hastings at 1-800-442-8277 ext. 1888, or email
Can a revision be made to an audit?
To dispute an audit, new audit information needs to be submitted to the Hastings audit department in writing along with providing any supporting documentation for the revision request.
A revision was requested, is my bill still due?
Billing cannot be held until the revision is received in writing and an Audit reviewer confirms that a revision will be done. If the policy is already in a non-pay cancel status, no holds can be placed.
How do I contact audit at Hastings Insurance?
For audit inquiries, contact Hastings at 1-800-442-8277 ext. 1888, or email
What is the audit process?
During an insurance premium audit, a qualified auditor will review your business records, such as payroll, sales, and other relevant financial documents, to determine if your current coverage aligns with your actual risk exposure. This evaluation
helps to ensure that you are neither over insured nor under-insured, ultimately saving you money in the long run.
The audit process is typically straightforward and hassle-free. The auditor will schedule a convenient time to visit your business premises, or, depending on the nature of your business, a self-audit may be conducted. They will then carefully
examine your records, seeking to identify any discrepancies or potential areas of improvement..
Premium Audit Life Cycle
How soon will I get my Dividend?
90 days after the audit is completed.