Insurance carriers perform general liability and workers' compensation final audits for several essential reasons that offer direct benefits to the insured party. Understanding these can help insured businesses fully appreciate the audit process.
First, final audits provide an opportunity for businesses to ensure they're paying a fair premium. The initial premium is often estimated based on projected payroll or sales figures, which can change as the business evolves. A final audit ensures that the premium reflects the business's actual exposure during the policy period. If the business had fewer liabilities than estimated, they might be eligible for a refund.
Second, audits ensure that each employee is classified c
orrectly according to their actual work duties, which changes over time. The right classification means businesses aren't overpaying for high-risk classifications when their employees are performing low-risk tasks. This accurate classification can result in significant premium savings.
Third, the audit process serves as a valuable check and balance on the business's internal systems. It encourages businesses to maintain accurate payroll records, ensuring effective payroll management and fostering better overall business practices.
Fourth, audits validate businesses' compliance with workers' compensation laws. An audit that confirms adherence to these laws provides businesses with assurance, reducing the risk of legal penalties and safeguarding the company's reputation.
Overall, general liability and workers' compensation audits offer significant benefits to the insured. They provide an opportunity to rectify overcharges, uphold proper business practices, confirm legal compliance, and ensure accurate policy representation. These benefits underscore the importance of embracing the audit process as a useful tool in managing business risks and costs.
Please contact us for further information on interpreting your current audit or any other Commercial Insurance related questions.