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Premium Audits – How Far Back Can They Go Into Your Policy Years

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Premium Audits May Go Back Into The Past

Workers Comp premium audits can be a harrowing situation.  This can be worse when you current or prior carrier decides to re-audit your policy after they already had one shot at it.   The very short question  in the post title came in last week from California.

Old Clock Premium Audits At The Wall Old Picture
Wikimedia Commons – Paragbhagat8

California handles their premium audits a little differently on time limits.   My rule of thumb is the current policy year and:

  • Three years into the past for most states
  • One year for California
  • Two years for Ohio

As an example if your Workers Comp policy period looked something like this:

  • August 1, 2007 – August 1, 2008
  • August 1, 2008 – August 1, 2009
  • August 1, 2009 – August 1, 2010 – not in OH or CA
  • August 1, 2010 – August 1, 2011 – not in CA
  • August 1, 2011 – August 1, 2012
  • August 1, 2012 – August 1, 2013 – current policy
Hand Presenting Premium Audits Concept
StockUnlimited

The ones that could possibly be audited in most states are in bold and italicized.  Most audits are only for the last year’s policy that just expired.  While it is legal to go back more than just the last year, I have always found that to be a questionable subject unless the carrier has some reasonable explanation.

The same time span is comparable to IRS audits.  This may have possibly been where the origination of the rules for auditing workers comp policies.  The basis could also have originated with Unemployment Insurance.

We had one caller from October that says there is a California carrier wanting to go back 10 years to re-audit their policies.  From what I can tell, this employer had completely opened up their business books to the carrier’s premium auditor every year.

We are currently looking at that business’s payroll and business books and have found nothing beyond what the original auditor had found in their premium audit.  In fact, we found a few inconsequential overcharges in the initial stages of the review.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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