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Physical Premium Audits – COVID 19 Removed The Physical Part


Will Today’s Hybrid Audits Ever Return to Physical Premium Audits?

First – let us define the three types of audits in this article –

pic of coronavirus mask physical premium audits
Wikimedia – NetanelBacharSchwartz

Short Definitions

Hybrid -the records are usually reviewed offsite -technology has allowed much easier access to employer records without having a “physical presence” at the employers’ offices.   If the employer hires its own premium audit consultant, the audit is usually hybrid.

Self-reporting audit– the employer submits their payroll and classification codes to their insurance carrier.   Spreadsheets are critical to the success of self-reporting audits.   This type of audit usually occurs with very small companies.

Physical – the premium auditor physically visits the employer’s offices to review the records onsite.  Many states require physical premium audits if the premium or payroll amount reaches a minimum figure.    The auditor may request to take some of the records offsite – my opinion on records removal can be found here.

COVID-19 Lockdowns Changed Everything

The first that I heard of employers not allowing any type of outside contact began in March and has not changed that much since then on who comes and goes at employers.

Hybrid audits became very necessary in states such as California and New Jersey.  The Departments of Insurance required the carriers to process premium refunds due to furloughed employees and reclassified employees along with other requirements such as 90-day grace periods for premium payment.

The Classification Code 8871 became very popular almost overnight.    The Telecommuter Class Code was extremely important for employees working from home on their computers.

Three carriers and two agencies contacted J&L to obtain our opinion on how to process refunds to employers even though physical premium audits were placed on hold.   The answer was modified hybrid audits.

Hybrid premium audits came to the forefront over the last six months.

My Predicted Change to Physical Premium Audits

In my opinion, physical premium audits will not be eliminated entirely and replaced with hybrid audits.  Premium audit disputes would spike over “the auditor does not know what we do here at our plant” or something similar.

My predicted change is the Departments of Insurance and Rating Bureaus (NCCI, WCIRB, etc.) will increase the minimum requirements for physical premium audits to a higher level.

How will this occur? The process has already started for insurance carriers and premium audit companies.  Check out this webinar today on premium audits.

Child in medical mask physical premium audits during coronavirus pandemic
Wikimedia Commons – vperemen.com

Premium audit companies and insurance carrier premium audit departments have started using algorithms and analytics to choose the type of audit – from the webinar page –

“The webinar will focus on how insurance carriers are integrating advanced analytics and machine learning to their premium audit process t

PRP results carriers are seeing the benefit of proactive risk mapping. 

Objective: Understand how analytics works and how carriers can integrate modeling into their premium audit process”. 

Physical premium audits will never be eliminated totally.  How premium audits are conducted post-COVID-19 will change in early 2021 and 2022.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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