Field Audit Requirements/Guide
At Vincent & Vincent Companies Premium Audit Division, our expectation is for a high quality product that encompasses the entire audit process and not only data collection.
Below are key audit guidelines/requirements that all V & V auditors must follow and adhere to:
- Time Service ĖAudits must be completed within 45-60 days of cancellation date, expiration date, or date of receipt of request from the carrier. For WC Assigned Risk policies, the time frame will be 45 days.
- Making appointments and/or closeouts:
- For audit requests received before expiration date, we have to make the first contact with the insured 1-2 weeks before the expiration to give them a detailed information about what will be needed for the audit.
- For cancellation audits or audits received after expiration, we should make immediate contact with the insured to complete the audit within 2-4 weeks.
- Once the contact is made, try and get the appointment 2-3 weeks after the expiration date (document this in the progress report as the second attempt). If this is not possible, try and get the appointment after this period. If the insured is not taking the audit appointment that seriously, contact the agent or broker and explain to them exactly what has happened about the audit appointment and ask them to contact the insured to comply with the audit.
- If on initial attempt insured could not be located, contact the broker/agent immediately for them to provide the insuredís current address, contact name, and telephone number for the audit. At this time, tell the agent/broker for them to please tell the insured to comply with the audit.
- Give the agent or broker 1 week to get back to you. After 1 week, if you donít hear from the insured or agent send/mail a final audit notice letter to the insured with a tentative audit date, explaining to them that you have a time frame to complete the audit, and as such, you canít wait indefinitely.
- If you donít hear from the insured or any other responsible person in authority who will help to complete the audit, then submit as non-productive within 45 days. Always document time, date of call, and the name of whom you spoke with.
- Some customers require that a request not be returned as non productive unless they are notified. In cases like this, the audit department will contact/notify the customer and later inform the auditor about the customer's response before the request can be returned as non productive.
- Do not make any visit unless you confirm the audit appointment with a responsible person who is in authority (never make a cold call on an insured).
- Policy Period vs. Audit Period:
Audit period must be within 2 weeks of policy period or an explanation provided. For cancellation audits we must audit to the exact policy period. Each classification shown on policy must be addressed.
- Description of Operations:
A full and comprehensive description of the insuredís operation is to be provided. This is to include type of product, how it is sold, and how it is delivered.
- Named Insuredís, Entities, and Locations:
For each entity listed on the policy you must provide a full description of operations and define exposures. Lump sum numbers will not be accepted. (Pay close attention to the policy class codes, endorsements, locations, and entities shown on the policy.)
- The chargeable payroll or sales must be balanced back to the state and federal returns (941s, W-3, 1099s, Form 1120, Schedule C, Corporate Tax Return, etc.) or other additional sources.
- SPECIAL/RUSH REQUESTS: Auditor must contact insured within 48 hours of receipt of audit request to make a definite appointment. If the insured cooperates, the audit must be made within 14 days of receipt. Upon completion of the audit, the auditor will transmit (fax or e-mail) the report within 2-5 business days.
- No financial or exposure information may be accepted over the phone. The only materials which can be accepted by mail or fax after the initial audit are tax forms, state wage reports or certificates of insurance.
- At no time should data shown on the audit worksheets be obtained by adding up data from the insuredís records. Data detail is necessary in order to assure that others can follow the audit trail.
- When new business audits are performed at another location (such as accountantís offices), the auditor should contact the owner/officer of the company for verification of description of operations and duties of employees or for accounts with multiple codes, the insuredís business location should be visited for visual verification of classifications and exposures. This is optional for contractors.
- When conducting a pre-audit or preliminary audit, the audit period should be the three most recent months of the insuredís operation. If it is not feasible to use this time frame to conduct the audit another time frame may be used provided it is a minimum of 3 months in length, deviates no more than six months from the effective date of the policy and the reason for using a different timeframe is documented. If a 3 month period is not available to satisfy the minimum audit period requirement, a lesser period may be used provided an explanation is documented. The audit period should be clearly documented within the audit worksheet and all exposures should be annualized.
- The loss history must be reviewed. Each claimant must be listed within the audit worksheet along with a description of job duties, class code, and the claimantís exposure for the policy period. (The customer will provide copies of any applicable claim activity).
- All employees assigned to standard exception classes must have their names and classifications shown in order to assure that payrolls are properly distributed between classes. This requirement is not applicable for some carriers if there are more than 20 (twenty) employees assigned to a standard exception class, but the worksheet should document the reason why all the names are not shown.
- We recommend that auditors do a class A audit(showing names of employees by department) as this eliminates the need for a reaudit visit if and when there is a dispute by the insured or audit contact. For WC audits, this will also help with the test audit process by the state insurance bureaus.
- The auditor must review the following subjects with an owner, officer, or the person in charge of the business in the exit interview:
- Owner, partners and officer duties. List each by name, title, earnings, duties, and class code. (Including both active and inactive)
- Names of insuredís employees assigned to standard exception classes
- All changes in classification of risk
- Uninsured subcontract labor/independent contractors
Note: For large businesses, where the owner or an officer may not be accessible, the auditor may conduct the audit review with an adequately empowered subordinate and provide documentation in the questionnaire.
- SUBCONTRACTORS: Follow normal and usual audit procedure on subcontractors.
- All subcontractors used by the insured must be documented by name, type of work, labor/material split. The amount paid, and if insured, the name of carrier, policy number and policy period.
- If uninsured sub, indication of whether subcontractor is a casual labor and rate the uninsured sub under the applicable class code.
- Each subcontractor being excluded from the audit must have comments documented indicating the reasons the subcontractor warranted exclusion from the audit.
- Any amounts which are deducted from the subcontractorís total exposure must be clearly identified and explained. If the deduction is for materials or equipment with operators the amount must be actual and not estimated or based on percentages. All audits having subcontractor exposure must be in compliance with State, Bureau, ISO, NCCI and applicable customers and/or Affiliate independent filing rules.
- Subcontractor limits of liability on Certificates of Insurance must equal or exceed the insuredís policy limits.
- If General Liability coverage is being audited, a list of all subcontractors with liability limits less than 300/300 or 300 CSL is to be attached to the audit.
- No audit is to be held waiting on Certificates of Insurance or WC subcontractor waiver forms. Instruct the insured to mail the forms to our audit department or the customers underwriting department if they are unavailable at the time of the audit. Adjustment for late Certificates of Insurance will be made at the discretion of the underwriting department. Waivers and Certificates of Insurance reviewed at the audit must be attached to the completed audit or have all details thoroughly documented.
- In order to expedite resolution of future potential disputes, the auditor should provide copies of the audit to the insured when any of the following conditions exists:
- Uninsured subcontractors
- Changes in risk classification
- Large additional premium
- Insured requests a copy of the audit
Please do not discuss APís or RPís with the insured. Only show them the final audit results when doing your exit interview. Please do not compare the actual payrolls to the policy estimates (only if they ask to see them). Sometimes the estimates may not be correct.
Please do not ever tell an insured that the policy may not be classified correctly. Just take down the necessary information and notify the company underwriters.
Please do not tell the insured that they will pay additional premium or get a return premium since that is not our duty.
- On special and large accounts, a few of our customers require that the insured sign the worksheet or an approved sign-off sheet. The sign-off sheet should be attached to the completed audit file in some cases or fax to the customer.
- Multi-State audits must be carefully audited and be sure to follow the manual rules that apply to each state.
- When auditing the auto coverages, be sure to check for additions and deletions. If deleted, then show the deletion date. If added, then be sure to fill out our auto form. Check for hired auto exposure. This is total cost for any rental, leased (short term) or borrowed autos. Last is the non-owned coverage. This is based on the average number of employees. All 3 exposures have to be shown on the summary page.
- When auditing contractors, always state whether the insured is doing commercial or residential work. Document the audit if the payroll breakdown is not available. Always mention about the territories insured operates, e.g. NY Territory 1, 2, or 3.
- Notice to Underwriter:Use this section of the worksheet to give more explanation in regards to adding/deleting classifications, reporting large APís or RPís, supporting all class codes used in description of operations, etc.