Unlike other types of insurance you purchase, the premium for your workers' compensation coverage is initially an estimate and is not finalized until the end of your policy period.
Your organization's payroll can change throughout the year if your workforce grows or shrinks, employees work overtime, or your organization expands or diversifies operations.
When a policy period ends, SFM Risk Solutions conducts a premium audit of the past policy period payrolls and classification(s), and the billed premium is adjusted to reflect any changes. The premium audit ensures that premiums are fair and accurate.
The final premium might be more or less than the initial billed premium. If the premium estimate was too low, the policyholder is charged additional premium. If the estimate was too high, the policyholder is reimbursed for any unearned premium.
Some policyholders have physical audits on location at their own facility, while others are asked to complete their audit online or on paper. SFM Risk Solutions will let you know how your audit will be conducted.
Workers' compensation premium audits are industry standard. The requirement to be audited is outlined in Section 5G of your policy.
New physical audit standards are in effect for the Assigned Risk Plan, mandated by the Department of Commerce. These new standards will affect both construction and non-construction accounts and those policies with a 1/1/2015 effective date and beyond. Please see the requirements below to assess the likelihood of a physical audit.