Premium Audit Nightmare – Change Policy Renewal Date
Almost 50% of the Workers Comp policies renew at the first of the year. One thing we see very often is our client or potential will call and say that they have found a great low-priced policy they have found and will be switching to the new insurance carrier.
We then will usually receive a frantic call or email after the policy expiration. The insurance carrier payroll (premium) audit bill is huge and the company did not have the money budgeted to cover the bill.
One of the easiest ways to avoid this type of disaster is to compare your Workers Compensation policies and audits from the past. If your prior premium audit and polices indicate that your company has for example $2.5 million in payroll, then why would the new policy have a payroll of $300,000? This is from a real-world example.
The main occurrence that may lower your premium from the former year would of course happen due to a period of major layoffs.
I am not saying that any company has to pay every penny owed on the policy upfront. However, if you have a previous payroll of $2.5 million, you are going to have to “pony up” a large amount of $ at audit. Your company should have a budget for Workers Comp premiums for the upcoming bill after the premium audit.
This type of budgeting advice will also apply to any policy. I wanted to pass this info along due to the large % of polices that renew on January 1st. I wrote a previous article on payroll audit budgeting here.
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