Short answer
A premium audit is a routine review that adjusts your estimated premium to your actual payroll or sales. Workers’ compensation and general liability policies commonly include one. Policies usually require you to cooperate, though the rules depend on your state and policy terms. Verify any audit request through your agent or carrier before you send records.
Why does a premium audit happen?
Carriers estimate your premium at the start of the policy, based on projected payroll or sales. After the term, a premium audit compares those estimates with what actually happened. The premium then goes up, down or stays the same.
An audit is a normal part of these policies and doesn’t signal a problem with your firm.
Is a premium audit request legitimate?
An upstate New York engineering firm received a workers’ compensation test audit request from the state rating board. The firm asked: “Can you confirm the legitimacy…? are we required by law to participate?” Doubt was reasonable, since fake requests are common. The carrier confirmed this one was a legitimate random test audit.
Whether participation is legally required depends on your state and policy terms. Policies usually require cooperation with audits, so check yours.
To verify a request, call your agent or carrier on a number you already have. Never use the number or link in the email. Our guide to phishing and IT security explains how to verify requests like this.
What do auditors ask for?
Auditors typically ask for records that show what your firm actually paid or earned:
- Payroll records and tax filings
- 1099s issued to independent contractors
- Certificates of insurance from subcontractors
- Sales or fee records, for general liability audits
Having these organized before the notice arrives makes the process faster.
Why do subcontractor certificates matter in a premium audit?
An uninsured subcontractor can be added to your payroll at audit, which raises your workers’ compensation premium. A current certificate of insurance from each subcontractor shows they carry their own coverage. Collect certificates before work starts and keep them for each policy year.
What is the difference between a rating-board test audit and a carrier audit?
A carrier audit comes from your insurer and sets your final premium. A rating-board test audit comes from the state bureau that oversees rating. It checks that policies are classified and priced correctly. Both are real, and your agent can tell you which one you are facing.
Example: two policy years of certificates
A California civil engineering firm told us a client needed workers’ compensation certificates covering two policy years for the client’s own audit. This is a common request. A firm that keeps certificates organized by year can answer in minutes, and a firm that doesn’t may spend days tracking them down.
What to check when you get an audit notice
- Who sent it, confirmed through your agent or carrier
- Which policy and policy period it covers
- Which records they are requesting and the deadline
- Whether your subcontractors’ certificates are current
- Whether your policy explains your audit obligations
Ask an agent if you aren’t sure the request is real.
Related questions
Do architects and engineers get premium audits?
Often yes, on workers’ compensation and general liability policies. Ask your broker which of your policies are auditable.
Am I required to participate in a premium audit?
Policies usually require cooperation. The legal rule depends on your state and policy terms, so confirm with your agent.
How do I know a premium audit request isn’t a scam?
Contact your agent or carrier using a number you already have, not the one in the message.
Can a subcontractor raise my audit premium?
An uninsured subcontractor can be added to your payroll at audit. Collect certificates to reduce that risk.