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Premium Auditor Asked Employer To Sign Audit Agreement

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Audit Agreement – Premium Auditor Asked Employer To Sign Off ???

The Audit agreement form has been a rather controversial topic.  This question was emailed in earlier this week.  We had our yearly Workers Comp premium audit last week.  The insurance company’s auditor actually worked for a premium audit company and was not a direct employee of the insurance carrier.  

Two businessman Audit Agreement shaking hand
Wikimedia Commons – Duisenberg

After the auditor completed the audit, I, as CFO was asked to sign off on an audit agreement form where I agreed to pay the premium owed after the audit and that I agreed to the audit.   The form is sitting on my desk.  Should I sign it?  What are the repercussions if I do not sign it? 

This is a disturbing trend that I have heard on the Workers Comp airwaves over the last few years.  There seems to be not even an audit company, but certain auditors in certain companies that have used this tactic.

I am not sure that it is even legal to ask you to sign anything after an audit admitting that you owe the $.  In all Workers Comp policies, there are rules about Workers Comp premium disputes.  I have never personally seen in any policy the requirement to sign an agreement to the audit results.   There are also many state laws, rules, and regulations that would seem to prohibit that request.   Of course, if you sign it, then the policy and rules/regulations will not matter.

Woman Audit Agreement Talking To Man Signing Papers
StockUnlimited

Your Workers Comp policy may be unique.   I thought I would reach out to a few premium auditors and ask their opinion on if they have ever requested this sign off. I also asked if they knew of any auditors, auditing companies, or insurance carriers that requested a signed agreement.

The answers were unanimously – no.  According to the insurance premium auditors if the premium bill was in collections for a long period of time, there are some agreements that could be signed such as a partial payment arrangement or if the file was in litigation to stop the collection process.

I am not saying NEVER on this one.  There may be some specialized policies where this may occur, but it would still be in the policy.  I suggest immediately reading the policy front to back.

By signing the agreement, you will also be giving up certain rights as a policyholder.  

 

Picture of Two Man Hand Shaking Premium Auditor Asked Agreement
123RF

As I mentioned previously, I have never seen in any policy the requirement to sign off on a premium audit whatsoever.  There are a few exceptions that I noted in the last post.

An employer would give up most of their rights by signing such an agreement.  These rights would include:

  • The right to later question the audit is eliminated.  If you agreed to the audit, it is too late to even consider a premium audit dispute.  Get the out the checkbook and pay up.
  • Some of the agreements may require that your company also give up all rights to the present audit and all of the past ones.  If you find a mistake in your next policy or the current one, you cannot ask for premium refunds on past policies.

    Agreement Premium Auditor Asked Paper
    StockUnlimited
  • Your company may be required to pay the premium audit bill very quickly according to the auditor’s side agreement.
  • The insurance carrier may possibly still be able to audit your past and present policies and charge your company more premium.  This would all depend on the agreement you signed with the auditor.
  • Your company may have to pay all or a portion of the audit findings on the spot.   This is rare, but it does happen.

Please note that most premium auditors are good people just doing their jobs.  I cannot imagine why these good people would want you to sign such an agreement.

There are certain instances where an agreement might be appropriate, but not on a just-completed workers compensation premium audit.

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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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