Premium Audit FAQ
Do I have to complete the Premium Audit?
Yes. The Premium Audit process is standard for all insurance companies, and our insurance policies and state insurance regulations require us to conduct premium audits of certain policies (e.g., Workers’ Compensation, General Liability, and Commercial Automobile). Please note that a Premium Audit is required for all Workers’ Compensation and most business insurance policies regardless of whether the policy has been renewed, canceled or moved to another carrier.
How will the Premium Audit process work?
Our Premium Audit department or an authorized Everest audit partner will contact you at the end of your audit period to inform you about the steps in the Premium Audit process, including how your Premium Audit will be conducted (physical/in-person, virtual/phone or electronic/online) and what documents will be required to complete the audit.
Why is a Premium Audit required?
All Workers’ Compensation policies are required to have a Premium Audit as directed by state regulations. Some General Liability and Commercial Auto policies with an estimated exposure basis are also required to have a Premium Audit completed. These audits help make sure you are paying the right amount for the right coverage. Your participation in complying with the Premium Audit process is important to calculate your final premium and to avoid any adverse actions or audit noncompliance charges.
How will the Premium Audit be conducted?
Our customer-focused auditors are here to help you through the process. Premium audits are conducted by an Everest staff auditor or by an authorized Everest audit partner firm using a variety of methods after the policy expiration. The method is determined by Everest and may be dependent upon the size of the risk, industry characteristics, and other key underwriting factors.
- Physical Audits are completed in person at your location
- Virtual and Phone Audits are completed remotely with records securely uploaded to auditor
- Electronic Audits are completed either online or via regular mail
Preparing for the Audit
It is best to prepare all requested audit documents in a summarized and organized manner prior to the auditor’s arrival, phone call or online request due date. Maintaining your records and documentation throughout the policy period may save you time and money. Records that are not properly maintained could result in a higher premium as the exposure could be placed in higher rated classes. A few suggestions to ensure an efficient process are included below:
- If items such as overtime, 401(K), cafeteria (health) plans, severance, tips, intercompany sales or product returns exist, they should be shown separately in your records so proper credits can be given. Make sure to obtain valid certificates of insurance for any subcontractors utilized during the policy period so the exposure is correctly captured in your audit.
- Where multiple class codes are applicable to your business, maintain your records to reflect the time and actual wages paid to employees while doing each type of job so the payroll can be reviewed for possible separation. Sales records should be maintained to show the various products or operations your business might be involved in, so the correct classification is applied for each.
- Your audit period may deviate from your policy dates, by no more than 15 days while still capturing the same total number of days as your policy. So, as an example, if your policy ends on the 12 of a given month, the auditor may audit either from the first pay period following the 12 OR the first pay period of the month. The ending date will follow 52 weeks from the first date utilized.
Common documents and information needed
Please note that your auditor will let you know what specific documents are required for your audit. Common documents that will be requested include but are not limited to:
- Officer or ownership information including names, titles, stock ownership held, full amounts paid and duties performed
- Payroll journals, payroll reports, payroll summaries, etc. showing gross wages by employee. It is preferred these be exported into Excel
- Federal and State Quarterly Tax filings for the period that most closely matches the policy dates
- Employee job duties and job descriptions
- General ledger, cash disbursements and/or 1099 reports to reflect all subcontractor, cash, casual, temporary or possible other laborers
- Profit and loss statement required for all policy types for verification of business operations
- Certificates of Insurance for all subcontractors, 1099’s or others
- Reported claim information (for workers’ compensation audits only) including claimant names, job duties, date of hire and date of termination
- Sales journals or general ledgers for GL policies based on sales or receipts
- Vehicle inventory for Commercial Automobile including all changes
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