Every employer wants their workers to return home unharmed at the end of a workday. However, because it is impossible to foresee and prevent every hazard, even in the safest of work environments, workers’ compensation coverage is required in most states across the U.S.

As an insurance program that provides for ill or injured employees, most workers’ compensation (WC) policies are subject to an audit. This annual review ensures that the policy-holding company complies with the insurance provider’s standards, allowing them to maintain their set policy and premiums.

An Employer’s Role and Workplace Safety

The Occupational Safety and Health Administration (OSHA) requires all employers to provide a safe workplace for their employees. It is the employer’s responsibility to provide workplaces free of known dangers as well as educate and train their workers about their rights.

Furthermore, almost every state within the U.S. requires employers to purchase a workers’ compensation policy on behalf of their employees. In Texas, however, having workers’ coverage is optional.

Workers’ Compensation Explained

Workers’ comp provides financial assistance to an employee should they suffer a work-related injury or illness. In general, it will provide financial support to employees during their recovery, prevent out-of-pocket expenses for the employer, and protect the business from legal claims. Benefits include compensation for:

  • Medical costs
  • Lost wages due to an inability to work
  • Ongoing care costs
  • Disability benefits

Understanding Workers’ Comp Audits

Workers’ comp audits are an annual review of records to determine and verify that premiums paid by employers accurately reflect the risks involved with their business and working environment. Audits can take place over the phone, mail, online, or in person.

Insurance providers calculate workers’ comp premiums by estimating a company’s projected payroll for the upcoming policy term. Once that policy expires, an audit determines the actual amount spent on payroll. After the inspection, the provider can account for any discrepancies between actual and projected payroll payments, which directly determine policy rates.

Audits allow insurers to review a business’ designated class code. These codes represent the level of risk associated with industry and play a significant role in determining premiums. Essentially, this review ensures that policyholders pay the right amount for proper coverage.

Preparing for an Audit

These mandatory audits typically begin with a notice from your policy provider regarding an impending audit. Most insurance companies provide notice roughly four to eight weeks before your policy’s expiration date.

Your auditor will require access to necessary documentation, regardless of how they plan to perform your audit. It’s in your best interest to locate and organize all the necessary documentation. Though documentation requirements vary by state and insurance carrier, requested information usually includes:

  • Your business’ account ledger, sales journal, cash receipts, business checkbook, and sales tax records
  • Employee information, including Form 941 for policies with employee payroll, and Schedule C Tax forms or other income tax forms for those without employee payroll
  • Payroll information such as names, state of employment, corporate titles, stock ownership, length of employment, gross wages, and salaries for all employees
  • Payment and certificate verification including 1099 Forms and certificates of insurance for leased employees or subcontractors
  • Detailed descriptions of each job, business function, and company operation
  • Documentation of the number of employees at each location
  • Owner/officer names and titles
  • State unemployment insurance tax reports
  • Overtime payroll records

Workers’ Compensation Audits with The Hartford

The Hartford is an insurance company that takes pride in making their audits as easy and straightforward as possible. Their auditors will almost always reach out by email, letting you know if your audit will be performed by phone, in-person, or online, and they’ll tell you exactly which records you will need for the review. The Hartford business client login and self-service portal make online audits quick and stress-free.

Prepare for Your Audit to Continue Protecting Your Employees

Every workers’ comp insurance provider reviews policies at the end of their terms. Understanding audit rules and preparing for your review helps your auditor get an accurate view of the policies your company needs. Provide your insurer with the accurate information they’ve requested, and your coverage will continue uninterrupted.

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