Cheating on Your Audit and How it Doesn't Pay Off

Insurance carriers are surely cracking down on clients withholding payroll or gross revenue information.  One of the most repeated complaints I hear from prospects or new clients is that they always get a pesky audit bill at the end of the insurance term.  And, let's be honest.  It's never a good time to pay a large chunk of money to an insurance company.  But if you lie when reporting your revenue or payroll, be prepared to get caught. 

These past few years, projections have been tough to predict.  We've seen clients down size drastically, from 200 employees to 20.  We've experienced clients going out of business with hopes of re-opening their doors again in a better economy.  And we've witnessed companies joining forces to make sure they can weather the storm.  The economy took a giant leap off a cliff and, hopefully, we're slowly but surely climbing our way back to the top.

With all the economic pressures, it's never fun to also deal with an audit from your insurance company.  So here are a few tips to help make sure you don't get that HUGE bill at the end of your insurance term:

• Don't try and cheat the system.  Seriously.  Use accurate numbers at the end of the term and report properly.  Pull your reports directly from your payroll software or payroll company.  This will assure the insurance company that there is no funny business going on.  Some insured's have tried to skim their numbers only to be faced with criminal charges down the line.  And, I can guarantee you, those charges and defense costs were MUCH more then any audit they ever received. 

• Ask your insurance broker to perform a mid-term audit on your books.  Checking in with you about 6 months into your insurance term is a good rule of thumb.  Your broker should be comparing your current numbers (payroll and/or gross revenue) to the projection listed on your insurance policy.  This will prevent any major audit bills from crossing your desk at expiration.  If the numbers are up, you may want to think about reporting that to the insurance company midterm so that payments can be spread out over time.

• Attempt to negotiate.  If you've been a loyal client with an insurance company for years, ask your broker to see if there's anything they can do to lower your audit bill.  It never hurts to ask.  If the insurance company isn't willing to lower the audit bill, see if you can get a payment plan going for the audit if necessary.  

Most importantly, make sure you keep the lines of communication open with your broker to assure you don't have a surprise audit at the end of your insurance term!