Audit Reviews

Large audit additional premium due – scary words. Each workers’ compensation policy is written with estimated payrolls for the upcoming year. When the policy expires, an audit is completed to get actual payroll. We then calculate the actual premium from the audit payroll, and subtract member payments during the year. The end result is that we have an audit additional due from our member or premium refund due back to our member. More than 97% of the time, this system works out well. The estimated payroll is close to actual and we end up with a small additional premium that is no burden to our member, or we end up with a small return where MTMIC sends a check back to our member. This high success rate does not mean that the other 3% goes easy. The large additional audit dollars affects the budget and causes stress to our member. It also causes discomfort at MTMIC. We do not like to do things that aggravate our members. Remember, most of our members have been with us for years, and that personal relationship and trust is greatly valued by our member and by the MTMIC staff.

How do these large additional audit premiums happen? On a new policy, we receive payroll estimates from the member and use these on the policy. For renewal policies, 60 days prior to the renewal, we send a letter to each renewing policyholder to ask for updated payrolls. Most often we get these letters back with updated payrolls, and that new information is used on the renewal policy. However sometimes, our members do not return updated payroll information to MTMIC and we renew the policy with the same information as the expiring. Most often that works out fine for our members that have very similar payroll from year to year. It creates a problem for a member whose payroll is growing significantly, or they’ve added a new shop or exposures. These events sets us up for a large additional premium.

Again 97% success in having small audits is good, we would like to reduce further that 3% of challenging audits. What can we do?

• Please return the renewal form with your updated payrolls. Your updated payroll information will be more accurate than payroll information 2 or 3 years old.
• Midyear review – we have many members who do this. If you sense your payroll is climbing, and you have more people, longer hours, longer shifts, more shifts, do a midyear payroll review. If you need our help with this, let us know we would be glad to help.

Audit reviews on workers’ compensation have been a normal part of the process for decades. Budgeting payments by flat payments per month or quarter are an effective way for our members to manage payments during the year. But, all that is predicated on payroll estimates that are in the ballpark. If there’s any reason to believe that there is a significant change in your payroll, call us, we would be happy to assist. We are accustomed to making these adjustments and would much rather deliver an audit at year end that is close to the mark than one that is unusually high or unusually low.

Lastly, last week we held the annual members meeting. News of the meeting and dividend status for next year will be included in the next newsletter.

Thank you for your support of MTMIC.