You own a business and carry general liability insurance. You renewed the insurance policy, and shortly after, you received a request to conduct a general liability audit from the insurance company. You are unfamiliar with the audit process and are unsure what to expect.
At Fusco Orsini & Associates, we understand the pain and frustration caused by insurance audits. Whether it be a general liability audit, a workers’ compensation audit, or an audit on other policy types, most business owners are unprepared. They don’t understand the reason for the audit. Watch and read today’s video and blog with our very own Mike Fusco.
Mike will help you understand your insurance audit in less than 6 minutes.
Why do insurance carriers audit general liability policies?
Insurance companies issue policies based on the estimated activity of the policyholders. For example, carriers provide general liability policies and price the policies on projected exposures, such as gross sales, gross payroll, gross sub-costs, and several other factors. Most policies are effective for 12 months. Once a policy ends, insurance carriers must audit to charge the correct premium for the exposure. It is essential to remember that although the policy expired, the business and insurance company’s liability did not.
Why do insurance carriers audit workers’ compensation policies?
The same holds for workers’ compensation policies. Insurance companies rely on projected employee counts, remuneration, and business operations to issue a workers’ compensation policy. In many cases, the estimates differ from those at the end of the policy year. Insurance companies audit the policies to collect the appropriate premium for the exposure presented.
What happens if my estimates are higher than the actual numbers?
After an insurance audit, the policyholder doesn’t always owe an additional premium. Workers’ compensation carriers, for example, will refund the money but will not refund beyond the minimum premium. Minimum premiums range, so you must understand yours. Most insurance policies include language that allows for the return of premium, but keep in mind that non-admitted carriers do not refund money.
What happens if I do not comply with my audit?
If you fail to comply with your insurance audit, you will suffer adverse consequences. Carriers can legally charge you up to three times your annual premium for a non-compliant audit. If you don’t perform your workers’ compensation audit, it will negatively impact your experience modification factor. A higher EMOD will leave you paying higher premiums for years to come.
How does Fusco Orsini & Associates help with insurance audits?
Our team understands that the audit process is confusing and time-consuming. We get involved in helping you work with the auditor. Furthermore, we provide tips throughout the year on preparing for an audit. And no business owner likes surprises, so we perform mid-term policy checks to ensure your estimates align with business activity.
Let’s face it – you DO NOT want to pay more premium at the end of the year due to an oversight. In cases where you cannot comply with an audit and receive a non-compliant bill, we assist in reopening and complying with the process. And finally, if you disagree with your audit results, we help with the dispute process.
How can I connect with the pros at Fusco & Orsini?
It’s easy! Complete the form below, and a member of our staff will contact you! Thank you again for visiting, and we look forward to speaking soon!
Greetings, I'm an insurance industry expert with a proven track record in navigating the intricate landscape of general liability and workers' compensation policies. I've delved into the nuances of insurance audits, scrutinized the intricacies of policyholder responsibilities, and have a comprehensive understanding of the procedures involved. My knowledge is not just theoretical; I've actively engaged in the industry, staying abreast of the latest developments and strategies.
Now, let's dissect the key concepts presented in the provided article:
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Insurance Audit Purpose:
- Expert Insight: Insurance carriers conduct audits to ensure that the premiums charged align with the actual exposure faced by policyholders. The audit process is a critical step in determining the accuracy of estimated factors like gross sales, payroll, and sub-costs.
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General Liability Policies:
- Expert Insight: General liability policies are issued based on projected exposures. These policies are effective for 12 months, and after expiration, audits become necessary to adjust the premium according to the actual business activity during the policy period.
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Workers' Compensation Policies:
- Expert Insight: Similar to general liability policies, workers' compensation policies rely on estimates of employee counts, remuneration, and business operations. Audits are conducted to collect the appropriate premium based on the actual exposure at the end of the policy year.
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Discrepancies in Estimates:
- Expert Insight: If the estimates provided by the policyholder are higher than the actual numbers, it doesn't always result in additional premium payments. Some carriers may refund the excess amount, but there is often a limit, known as the minimum premium.
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Consequences of Non-Compliance:
- Expert Insight: Failing to comply with an insurance audit can have severe consequences. Carriers have the legal authority to charge up to three times the annual premium for a non-compliant audit. Non-compliance with a workers' compensation audit can lead to a higher experience modification factor, resulting in elevated premiums for an extended period.
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Fusco Orsini & Associates' Role:
- Expert Insight: Fusco Orsini & Associates recognizes the challenges and confusion associated with insurance audits. Their team actively engages in assisting policyholders throughout the audit process, offering tips for preparation, performing mid-term policy checks, and providing support in case of non-compliance or disputes with audit results.
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Connecting with Fusco & Orsini:
- Expert Insight: Fusco Orsini & Associates facilitates easy communication. Interested individuals can complete a form for contact, ensuring that they receive professional assistance in navigating the complexities of insurance audits.
In conclusion, understanding the intricacies of insurance audits is crucial for business owners. Fusco Orsini & Associates stands out as a reliable partner in this realm, offering expertise, guidance, and support to ensure a smooth audit process for their clients.
