Premium audits in insurance are a standard procedure conducted by insurance companies to assess the accuracy of your coverage and ensure that you are adequately protected. While receiving a notification about an upcoming audit may initially cause some concern, it is important to understand that this process can actually be advantageous for both you and your insurance carrier.
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.
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 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.
In conclusion, receiving a notification about an insurance premium audit should not be cause for alarm. Instead, view it as an opportunity to ensure that your business is adequately protected and that you are not paying more than necessary for your insurance coverage. By cooperating with the auditor and providing accurate records, you can benefit from a thorough evaluation of your insurance needs and potentially save money in the process.
In conclusion, receiving a notification about an insurance premium audit should not be cause for alarm. Instead, view it as an opportunity to ensure that your business is adequately protected and that you are not paying more than necessary for your insurance coverage. By cooperating with the audit and providing accurate records, you can benefit from a thorough evaluation of your insurance needs and potentially save money in the process.
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.
It depends on the type of policy. Those that are required to be audited, are required by the policy contract.
Workers’ Compensation, General Liability, and Commercial Package Policies.
There are two types of audits: 1.) Physical Audit; 2.) 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.
At the policy expiration date/cancel date.
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.
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.
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.
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.
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.
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
INDIANA
IOWA
MICHIGAN
WISCONSIN
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.
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.
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.
For audit inquiries, contact Hastings Mutual at 1-800-442-8277 ext. 1888, or email
To dispute an audit, new audit information needs to be submitted to the Hastings Mutual audit department in writing along with providing any supporting documentation for the revision request.
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.
For audit inquiries, contact Hastings Mutual at 1-800-442-8277 ext. 1888, or email
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
90 days after the audit is completed.
[Title]
Understanding Commercial Audits
[Slide 1]
Audits
Insurance audits are conducted to ensure premiums paid by businesses match actual risks and exposures they face.
Insurance audits can help businesses avoid overpaying or underpaying for their coverage.
[Slide 2]
How can an audit help a business?
Business planning
[Slide 3]
If the original figures were underestimated or the insured's business increases, they are likely to have hired more employees or have increased sales. That will cause their premium to increase (the business was under insured).
[Slide 4]
The opposite is also true, if the original figures were overestimated or the year did not go as planned. If the sales or payroll decreases, then the premium decreases, creating a potential refund (the business was over insured).
[Slide 5]
Not all policies require an audit
Here are the main types of policies that need annual audits:
[Slide 6]
Audits help to maintain proper coverage
[Graphic]
Step 1: Policy issued with estimated exposure
Step 2: Actual exposure reported at audit
Step 3: Results used to determine actual amount of premium due
[Slide 7]
Audit Life Cycle
[Graphic]
Step 1: Policy expires
Step 2: Audit?
Step 3: Audit type
[Slide 8]
There are 2 types of audits
[Slide 9]
2 types of audits
Self-audit
Physical audit
[Slide 10]
Billing
When a policy is being audited the premium for the current term is still due as normal.
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.
If the audit results in additional premium, a new invoice will be generated.
If there is still premium due after an audit credit is applied, depending on the billing cycle, there may not be a new invoice generated.
[Slide 11]
Questions?
Reach out to the Hastings Mutual Audit Team!
audit[at]hastingsmutual.com
(800) 442-8277 ext. 1888
What is a non-compliant audit and how to dispute an audit?
DownloadEverything you need to know if you work with subcontractors.
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Hastings Mutual Insurance Company
404 E. Woodlawn Ave.
Hastings, MI 49058
Monday-Friday
8:00 a.m. - 4:30 p.m. (EST)
(800) 442-8277