As agents, we know that Workers’ Compensation insurance is more than just a policy—it’s a legal requirement and a vital protection for both employers and employees. But one area that continues to cause friction and financial risk is the failure of insureds to complete their Workers’ Compensation audits.

🔍 What Is a Workers’ Compensation Audit?

At the end of a policy term, carriers conduct an audit to verify the actual payroll and job classifications of employees. This ensures the premium paid matches the actual exposure during the policy period. It’s a standard part of the process, but when insureds don’t comply, it can trigger a cascade of issues.

⚠️ What’s the Risk?

1. Estimated Premiums
   If an audit isn’t completed, carriers often apply an estimated premium—usually based on the highest risk classification and inflated payroll figures. This can result in significantly higher costs for the insured.
2. Policy Non-Renewal or Cancellation
   Many carriers will refuse to renew or may even cancel coverage if audits are not completed. This leaves the business exposed and potentially non-compliant with state regulations.
3. Impact on Future Coverage
   Failure to complete audits can affect the insured’s ability to secure coverage in the future. Carriers may flag them as high-risk or require higher deposits and stricter terms.
4. Agent Reputation and Retention
   When insureds face unexpected bills or lose coverage, it reflects poorly on the agent—even if the issue was avoidable. It can damage trust and lead to lost business.

✅ What Can You Do?

• Educate Early: Make sure insureds understand the audit process from the start. Include it in onboarding materials and renewal conversations.
• Avoid Audit Surprises: Have the insured keep in touch during the policy term.
  • Collect and submit COIs to the carriers for all subcontractors during the policy period per state requirements.
  • Advise of large payroll changes midterm to avoid large return or additional premium adjustments at audit.

• Send Reminders: Proactively remind clients when audits are due. A quick email or call can make all the difference.
• Offer Support: Help insureds gather the necessary documentation. Most carriers will need:
  • Detailed payroll records (weekly/monthly)
  • 941s, W-2s, and 1099s
  • Subcontractor information with COIs
  • Job descriptions and time allocations
  • Any changes in operations during the policy term

📣 Final Thoughts

Workers’ Compensation audits aren’t optional—they’re essential. Make audit compliance a part of your renewal workflow. By helping insureds stay on top of their audit obligations, agents protect their clients, their book of business, and their own reputation.