At The Hanover, we understand that your business can change and evolve. To comply with state regulations and to help ensure your premium reflects your business operations appropriately, each year we perform a premium audit for workers’ compensation policies. During the audit, we compare the original payroll estimate with your actual payroll—and we need your participation to ensure the information is accurate.
To help you prepare for your audit, we've put together an overview of what to expect along with frequently asked questions (FAQs).
How should I prepare?
The best way to prepare for your audit is by keeping proper records and documentation throughout the policy period. An audit is conducted based on the review of accurate, organized records.
Your workers’ compensation policy is payroll based. To prepare for your audit, the following documents may be needed:
- Quarterly 941 tax documents/payroll registers
- Employee information, including:
- Description of duties
- Gross wages
- Furloughed wages
- Contracted labor
- Certificates of insurance for subcontractors, if applicable
- Description, location and dates of work performed
- Amount paid for contracted labor
What can I expect?
Your audit will be conducted in one of the four methods:
- On-site physical
- Electronic/virtual physical (constitutes as physical by all bureaus)
The method is determined based upon multiple factors, including premium, complexity and state regulations. An auditor will reach out to you following your policy expiration via phone, email or letter to provide you more information.
Frequently asked questions
- What is a premium audit?
Your policy premium was developed based upon information provided by you or your agent prior to the start of your policy term. Because premiums are based on actual exposure (payroll, sales, etc.) for the term, we must verify that your premium accurately reflects your business activity. This premium audit process involves reviewing the original estimates against your actual exposure and business operations.
- Why do I need to complete a premium audit?
Prior to the start of your policy, your agent and a Hanover underwriter estimated your premium based on your expected business operations. At the end of your policy period, an in-depth review of your operations is needed to determine if premiums were correctly estimated. Your premium will then be adjusted based on actual business outcomes, this is a requirement as outlined within your policy and is also a standard industry practice. Your participation in providing requested documentation is essential to ensure your premium is calculated correctly.
- Is a premium audit optional?
No. The Hanover, as well as all other carriers providing business insurance coverage, is required by many state insurance filings to conduct an annual premium audit for certain policy types (workers' compensation, general liability, commercial auto, etc.). This is also outlined within the provisions of your policy declarations.
Please note that a non-compliant audit could result in an automatic increase of policy premium. This is known as an estimated audit.
- How will a premium audit affect my policy premium?
Upon review of your business for the policy period compared to the policy estimates, your premium will be adjusted accordingly. By providing the necessary documents and information, this ensures that you are not paying more (or less) than necessary based upon your needed coverage. A thorough review of your business is completed by confirming your exposure (sales, payroll, et.), operations, employee classifications, use of subcontractors and inclusion or exclusion of officers.
- Who will conduct my audit?
Your audit will be completed by a qualified auditor, either a Hanover employee or an auditor from one of our vendor partners. All auditors will specify that they are representing The Hanover and have been asked to conduct a premium audit.
- When will my audit take place and how will I be notified?
You should expect contact from an auditor no later than 15 days past policy expiration. This could be in the form of a letter, phone call or email.
- How do I know my data is secure?
All transmitted data is sent to a secure portal or via encrypted email.
- I disagree with the results of my audit. What do I do next?
If you believe there is a discrepancy in the audit exposure or classification of your employees, please reach out to your agent, who will work with Hanover directly to initiate a formal dispute. A contact name and phone number of the auditor who completed your audit should also be visible on your audit statement and can also assist with this process.
- I missed the deadline to submit my audit documents. What do I do next?
If you have received an estimated audit or believe that you have missed the deadline to submit your documents, please reach out to your agent, who will work with Hanover directly to have the audit reopened. A contact name and phone number of the auditor who completed your audit should also be visible on your audit statement and can also assist with this process.
Contact your local Hanover agent with any questions regarding the workers’ compensation audit process.