What Records Are Required for the Insurance Premium Audit?

The insurance premium auditor professional may ask to review some or all of the following records depending on the basis of premium contained in your policy (i.e., payroll, sales, construction value, units of equipments or vehicles, etc.):

• Payroll records with details (i.e., by employee, dept, gross, overtime, etc.), including individual earnings records
• Payroll tax returns, federal and state unemployment reports
• General ledger/financial statements
• Cash disbursements journals, check registers, bank statements
• Business checkbooks
• Certificates of insurance for sub-contractors
• Job cost reports
• Sales journals
• Federal 1099's/1096 forms
• Vehicle registrations, titles or ownership tax receipts
• EDP system reports

The premium audit professional will use a combination of these records, depending on the type of policy requiring an audit, to determine the proper auditable exposure for the audit period in question. If some or all of your business records are maintained at your accountant's office, then you must inform the audit professional of the name, address, fax and phone number of the accounting firm during the audit appointment process. 

After the audit is completed at your accountant's office, the audit professional will discuss with you the audit results and may ask further questions pertaining to personnel or the business operations to justify your business classification on the policy.

What Is My Role in the Premium Audit Process?

As a construction business owner, you need to become involved with the audit process from the day you contact your agent/broker to secure a policy, all the way to policy expiration and until the premium audit is conducted. 

The following steps may help you to eliminate the stress associated with lack of planning before and during the conduct of your insurance audit:

• Provide your agent/broker with a complete description of operations or business, which will be used to determine applicable classifications.
• Provide your agent/broker with realistic estimated payroll, sales/receipts, vehicle or equipment unit count and other applicable exposures. A realistic exposure estimate will reduce the chance of large variation in audited versus estimated exposure at policy expiration.
• Provide your agent/broker with updates regarding any change in operations including ownership changes, large changes in your labor force, establishment of another operation in another state, etc.; this will ensure the issuance of applicable coverage endorsements prior to policy expiration.

• Properly maintain records required for audit with details about job categories, department breakdowns and information about key employees including their actual duties to allow for applicable adjustments to gross payroll.

• Upon contact by your insurance audit professional for an audit appointment, provide contact information for your accountant if you do not maintain your business records so as to facilitate the timely completion of your audit. Be prepared to answer additional questions with respect to personnel and job categories after the audit is completed with your accountant.
• Actively participate in the audit process or delegate to a responsible party when your insurance premium audit professional contacts you for an appointment.