September 8, 2022

Audit Noncompliance: What it Means and How to Prevent it

WRITTEN BY

As any business owner is well aware, a lot can change from one year to the next. Business will ebb and flow, employees will come and go, and compensation will vary. Responsible business owners also recognize the importance of keeping their workers protected throughout all of these changes, and a big part of that protection means having the appropriate workers’ compensation coverage.

Premium audits serve the purpose of ensuring policyholders are charged the correct policy premium for their current business operations. While they can be performed at different times, annual audits are ordered shortly after the end of the policy period. The completion of these audits is paramount for ensuring accurate premiums and coverage, but they can only be accomplished with the compliance of the policyholder.

What is Audit Noncompliance?

A typical audit timeline is 45 days. During this time, an auditor must be able to meet with the policyholder or their representative and review all pertinent documentation, including payroll records, employee job descriptions, and records pertaining to any contract and subcontract labor, such as 1099s and certificates of insurance. The inability to obtain or review any of these items could result in an auditee being considered noncompliant and the audit itself marked unproductive. The most common reasons notated for noncompliance status include:

Unresponsiveness
  • Not scheduling an audit appointment or missing audit appointments and not rescheduling in a timely manner
  • Missing the deadline to submit mail or online audit requests

Lack of Documentation
  • No payroll records for employees
  • No records of payments to contractors and subcontractors
  • Incomplete records
  • Missing verification documents (Examples - Form 941, Form 1099/1096, tax return)
  • Incomplete or no cash journal if paying in cash

Inconsistency
  • Unverified claims
  • Inconsistent records

Once attempts to complete an audit have been exhausted and it is considered unproductive, a 60-day notice of cancellation will likely be sent. In order to maintain coverage, it is imperative that this notice be acted upon quickly and the missing audit steps or information be provided. Once a policy is pending cancellation due to an unproductive audit, simply reopening the audit process is not enough. The audit must be fully completed before the cancellation can be rescinded, making it crucial that the process not be delayed any further into the 60-day period than is absolutely necessary. Similarly, it is important to note that policyholders who have previously had their policies cancelled due to an unproductive audit must complete the missing audit before their policies can be rewritten and pay any balance due.  

How Can Policyholders Avoid Noncompliance?

Audits can feel overwhelming. However, falling into noncompliance will only exacerbate that feeling. Timely compliance and adequate preparation will allow the process to run as smoothly as possible, keep your policy in good standing, and ensure that your workers continue to be fully protected in the coming year. Help ensure a successful premium audit by:

  • Being prepared by keeping good records, having records ready, and utilizing the assistance of your bookkeeper as needed
  • Being available to answer your auditor’s questions
  • Keeping your appointment with the auditor for a physical audit
  • Completing and submitting the audit and/or audit documents prior to the due date for online, virtual and mail audits.

At LWCC, our goal is to equip our policyholders and their businesses for the future to the very best of our ability. If you ever have questions regarding your policy or the audit process, explore our online premium audit resources or contact us via phone or email.

No items found.
Share this article

More news

NEWS
October 5, 2022

Here to Elevate Louisiana

The 2022 Louisiana Loyal Service Project was LWCC's largest to date. Together, employees and agent partners volunteered to help address the epidemic of food insecurity in Louisiana alongside the Greater Baton Rouge Food Bank.

NEWS
October 3, 2022

LWCC Safest 70 Star: James Machine Works

James Machine Works has always believed in doing the right thing. Their unwavering dedication to safety, their employees, and their community has brought them well-deserved recognition, including LWCC’s Safest 70 Award.

NEWS
September 29, 2022

29,291 Meals Provided through LWCC Louisiana Loyal Service Project

LWCC and agent network partner to benefit the Greater Baton Rouge Food Bank for the Louisiana Loyal Service Project.

Frequently asked questions

This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.

How do I register as a policyholder?

This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview.

This is a sample question for FAQs, this is a sample question.

This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview.

How do I register as a policyholder?

This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview.

This is a sample question for FAQs but expanded.

This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview.

How do I register as a policyholder?

This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview.

This is a sample question for FAQs but expanded.

This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview. This is just sample text serving as a placeholder.This is a sample two line introductory paragraph that serves as an intro on the blog/article preview.