Workers Compensation Consultants estimate that 1/3 to 1/2 of all workers compensation policies contain premium errors that cost employers thousands of dollars each and every year. When a mistake is made by an insurance company or auditor it is always the employer left paying for the mistake.

Unfortunately, due to the complex nature of premium calculations, multiple rating factors and areas of potential error, it is almost impossible for the typical employer, without help, to find and make the needed corrections. This is where an employer may need to call for outside help.

In this hub we're going to talk about what that means to you, how those audit mistakes cost your business and how to get those mistakes corrected! And make sure you check out "How to prepare for a work comp audit" for some great, helpful information about this topic!

When a workers compensation policy goes wrong it can cost you, the employer, many thousands of dollars. Many times seeking outside help is the only way to correct workers comp premium mistakes and you'll find there are several "workers compensation audit consultants" providing these services.

Most all have some presence on the web. Some of these consultants work exclusively in specific states, some provide services nationwide. So if you're searching the web for help, try searching for "workers compensation audit consultants" or maybe put the name of your state first like "Indiana work comp audit consultants" and you'll find some pretty good firms that way.

So what can go wrong............

Unlike many other types of business insurance where the premium is fixed, the workers compensation premium is based on the actual payroll your business incur over the described policy period. So when you start your workers compensation insurance policy you'll find an insurance agent who'll ask you some questions.....it may go something like this;

Agent: So you need workers comp insurance, huh?

You: Yea.

Agent: So, what do you do?

You: Well we kinda do a lot of things. We might build a deck on the back of someones house, we may add a family room, we may put a sidewalk in or paint a house. We may even do some snow removal, some tree trimming and probably some roofing. Why?

Agent: Well we just have to know how to class your business. Are you doing more carpentry than anything else?

You: Not really. We're really all over the place.

Agent: Ok. Well, we'll just put you in carpentry for now, it won't hurt anything to do that. The company will just fix it later.

You: But that's not really right.

Agent: But it's close enough.

Agent: What's your payroll going to be for the next year?

You: Well, I'm not quite sure. You see I'm just starting my business.

Agent: Well, your policy will be based on what your payroll is so we'll need to put something down. So how much payroll should I use?

You: I guess it'll just be me for the first few months.

Agent: Oh, did you want to be included in the coverage?

You: I guess so, what do you think?

Agent: Are you a sole proprietor, a LLC, corporation, partnership or what?

You: I'm a sole proprietor.

Agent: So what do you want me to use for your employees? It really doesn't matter what you tell me now cause the company will just make it up with the audit.

You: What's an audit?

Agent: At the end of the policy the insurance company will send out an auditor to look at your books and gather the correct payroll for the time you had the policy.

You: Oh.

Agent: So whatever we use now won't make much difference cause they'll adjust it later.

You: OK.

So that's how it all begins.....that's how the mistakes begin.....that's how your personal trip down the workers compensation road begins!

What's wrong with this scenario? Keep reading!

Shortly after the workers compensation policy you purchased expires you will be contacted by someone from the insurance company asking to set an appointment to perform the audit. Here's where you'll find an insurance auditor takes their job very seriously, especially if you try to reschedule or, heaven forbid, for any reason, are unable to make the appointment. Nothing seems to irritate an insurance auditor more than a policyholder who seems to be putting them off. Believe me, you may have the best reason in the world to delay that appointment but if you do you'll more than likely, from that point forward, be treated just a little bit better than dirt!

Keep in mind, the auditor works for the insurance company, not for you. They are not your friend. Their interest is in discovering additional premium for the insurance company, not to show you how to save money on your workers compensation insurance policy.

The auditor will have asked you to gather certain payroll related records and have them available for the meeting. These records may include:

• Payroll ledgers
• Job descriptions for each of your employees
• Check book registers
• Tax documents
• Certificates of Insurance
• and many other items

Typically the auditor will sit down with you and review these items, gathering payroll information, overtime information, detailed descriptions of each employees work duties and detailed descriptions of what you do at your business. They'll ask for copies of certificates of insurance you gathered from insured subcontractors and pull payments you've made to independent contractors from your check book register. All this information will be recorded for processing by the insurance company.

Did you know all this was involved when you asked that insurance agent for a workers compensation policy? More than likely not because many insurance agents are poor at fully describing this process to their client. Many times problems with workers compensation policies and audits begin right there in the insurance agents office!

Now don't get me wrong. There are many professional insurance agents throughout this country who do a fine job for their clients. Unfortunately, there are many who do not. For some pointers on how to choose a good insurance agent please see the article entitled "Choose your workers compensation agent wisely" found on the website Articles About Workers Compensation . I often refer to this site for information about workers compensation insurance.

Here's a few typical problems that are found in many workers compensation audits;

• The auditor used incorrect payroll information
• Payroll was improperly applied to the job classifications
• You are charged for subcontractors who had proper coverage
• Your employees were re-classified

These are just a very few of the errors that can be made. Each of these could cost you and your business $$ THOUSANDS $$.

For more information on you may be overcharged for workers compensation insurance please refer to my hub page titled "Overcharged for Workers Compensation? Here's How You Can Tell."

The premium generation and audit process for workers compensation is veery complicated. Many workers compensation insurance premium errors and mistakes are not apparent and go undiscovered for many years.

I've provided some opinions and had good results in the past working with Workers Compensation Consultants, a professional workers comp audit review firm, you can find them on the web. Whoever you decide to work with or if you decide to go it alone, pay attention to the details. You'd be surprised at the number of mistakes and errors that are made every day!

Thanks!