Reserve Question And Premium Audit = Not The Same Thing
We received this reserve question earlier this week. I thought I would address it now as there seems to be some confusion on the premium audit and reserving process for Workers Compensation. The emailed question was – How often should we do premium audit and/or reserve reviews on our Workers Compensation claims?
I thought it would be best if I separated the question in two parts. As an employer, you do not have to do a premium audit with your insurance carrier more than once per year. The premium audit is more of an audit of the mechanisms that result in your Workers Comp earned premium. Your insurance carrier will audit your company’s premium with 30 – 60 days after your policy expires.
The best answer would be immediately after the results of your premium audit are provided to your company by your Workers Comp insurance carrier. Once the premium audit bill is sent to you, the clock starts running on how long your company has to dispute or even question the premium audit.
As I have posted very often in this blog, most states allow your company to have the audits for the last three years reviewed by either you or a company that has an expertise in this area – shameless plug for J&L.
One of our areas of concern is that we are contacted by most employers just after their policy has expired. That concerns me and our auditors very heavily as that means if an error is found, your company just lost 1/3 or more of your possible premium overcharge recoveries. At the expiration of each policy, the policy from three years ago can no longer be reviewed along with the audit.
I will cover reserve reviews in the next post.