Business Insurance Audit

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Chandler

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Aug 3, 2008
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I got a call last Friday and the man said he needed to audit my insurance for my business. I wasn't sure about it and have never had this done before so I called my agent and the lady said yes they do that. The insurance company hires an independent contractor to do this. I thought at first I was being picked on or they thought I had did something wrong. But was told this was a common thing. The auditor said he needed to go through all my records. Could anyone give me some info on this or what is your experience? Are some insurance companies more prone to audit their customers?
 

Tazza

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I dont understand why they would need to do an audit, even if you made a heap of claims, don't they just refuse to insure you next time? and you find another insurer?
Sounds weird to me.
What records do they want? as i figured it would only cover claims, and nothing to do with your jobs/financial side.
I guess it could be to ensure you have enough cover...
 

nobull1

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Jan 4, 2007
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I dont understand why they would need to do an audit, even if you made a heap of claims, don't they just refuse to insure you next time? and you find another insurer?
Sounds weird to me.
What records do they want? as i figured it would only cover claims, and nothing to do with your jobs/financial side.
I guess it could be to ensure you have enough cover...
I bet it has something to do with how much income you claim you make. Some companies, if not all, charge insurance based on gross income.
 
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Chandler

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I bet it has something to do with how much income you claim you make. Some companies, if not all, charge insurance based on gross income.
The first I knew about it was on a Friday when he called and said he would be coming at 9:00 am Monday morning and that he had mailed me a letter. I told him I hadn't received a letter, to my knowledge. At first, I didn't know what he was talking about. I was skeptical about what was going on. He said he was a private contractor working for the insurance company. To make sure I called my insurance agent. I was told that yes they do audits and that it shouldn't be a big deal. And that he will probably be satisfied just to look at my last years business tax return. Well, when I got home on Friday evening, that letter was in my mailbox, so much for a notice. So I called the auditor back over the weekend to ask more questions. I asked him what was going on and what he would need from me. Basically, he said he would need all my records on my business for the past year, not just my tax return. He said the insurance policy year runs different than the tax year. I had felt like I had been singled out but he assured me that about 85% of the policy holders get audited, whether by phone, in person, or by mail. To my understanding, the reason they audit is to see where you are now verses what you told them when you took out your policy. Mostly what they are looking for is how much you use subcontractors and how much you use hired labor. And then, based on what they find, they will adjust it accordingly. Anyhow, I told the auditor that I couldn't have my records ready by Monday morning and that we would have to reschedule another time. Well he was okay with that, so we'll see what happens. This is just all new to me. The auditor said that when you hire a subcontractor or if it's your hired labor, that you're responsible when they are digging and if they hit a utility line. That's the bottom line and what they are concerned about. How much risk your company is to them.
 
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Chandler

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The first I knew about it was on a Friday when he called and said he would be coming at 9:00 am Monday morning and that he had mailed me a letter. I told him I hadn't received a letter, to my knowledge. At first, I didn't know what he was talking about. I was skeptical about what was going on. He said he was a private contractor working for the insurance company. To make sure I called my insurance agent. I was told that yes they do audits and that it shouldn't be a big deal. And that he will probably be satisfied just to look at my last years business tax return. Well, when I got home on Friday evening, that letter was in my mailbox, so much for a notice. So I called the auditor back over the weekend to ask more questions. I asked him what was going on and what he would need from me. Basically, he said he would need all my records on my business for the past year, not just my tax return. He said the insurance policy year runs different than the tax year. I had felt like I had been singled out but he assured me that about 85% of the policy holders get audited, whether by phone, in person, or by mail. To my understanding, the reason they audit is to see where you are now verses what you told them when you took out your policy. Mostly what they are looking for is how much you use subcontractors and how much you use hired labor. And then, based on what they find, they will adjust it accordingly. Anyhow, I told the auditor that I couldn't have my records ready by Monday morning and that we would have to reschedule another time. Well he was okay with that, so we'll see what happens. This is just all new to me. The auditor said that when you hire a subcontractor or if it's your hired labor, that you're responsible when they are digging and if they hit a utility line. That's the bottom line and what they are concerned about. How much risk your company is to them.
Oh yeah, I meant to say that I hadn't had any claims at all. Like Tazza mentioned, Income is also something that they look at too.
 

sandhills-elect

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Oh yeah, I meant to say that I hadn't had any claims at all. Like Tazza mentioned, Income is also something that they look at too.
Chandler, This looks like a bunch of BS to me. I have been in the Electrical contracting business for over 10years on my own and have never heard of this. I would tell that Insurance company to take a hike and there are a 1000 waiting in line for your business. They work for you not the other way around, if they can't trust you then you will find someone who can. They are not the IRS and have no business find out what you make or don't make. Once they have all this info, where is it going, out on a computer for everyone to look over, a bunch of BS if you ask me, call their bluff. I sure the hell would not deal with a Sub contractor( who the hell is he) Just my 2 cents. Brent.
 
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Chandler

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Chandler, This looks like a bunch of BS to me. I have been in the Electrical contracting business for over 10years on my own and have never heard of this. I would tell that Insurance company to take a hike and there are a 1000 waiting in line for your business. They work for you not the other way around, if they can't trust you then you will find someone who can. They are not the IRS and have no business find out what you make or don't make. Once they have all this info, where is it going, out on a computer for everyone to look over, a bunch of BS if you ask me, call their bluff. I sure the hell would not deal with a Sub contractor( who the hell is he) Just my 2 cents. Brent.
Yeah, I don't like it at all. The auditor said this was in the insurance contract that I signed. I don't remember seeing it. It must have been hidden in the fine print. If they give me a problem, I'll just look elsewhere for insurance. The thing that bothered me the most is that I just took this policy out last July and haven't had a claim and they are already auditing me.
 

TriHonu

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Apr 15, 2007
Messages
486
Yeah, I don't like it at all. The auditor said this was in the insurance contract that I signed. I don't remember seeing it. It must have been hidden in the fine print. If they give me a problem, I'll just look elsewhere for insurance. The thing that bothered me the most is that I just took this policy out last July and haven't had a claim and they are already auditing me.
My buddies insurance company audits him every 2-3 years. He is a one man excavating and snow removal business. He has had the same insurer for decades.
Sometimes he gets a visit, sometimes they just send him the forms to fill out and return. They also use outside auditors.
The last auditor tried to tell him he would be at his address at 9 o'clock on Tuesday. He told the guy that he must mean 9 PM, I'm a one man shop and will be out working... He then phoned the insurance company and told them what happened. They told him to calm down and they would just send him the forms.
His insurance also uses his gross as one of the factors to calculate his premiums. His past good record doesn't seem to matter.
 
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Chandler

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My buddies insurance company audits him every 2-3 years. He is a one man excavating and snow removal business. He has had the same insurer for decades.
Sometimes he gets a visit, sometimes they just send him the forms to fill out and return. They also use outside auditors.
The last auditor tried to tell him he would be at his address at 9 o'clock on Tuesday. He told the guy that he must mean 9 PM, I'm a one man shop and will be out working... He then phoned the insurance company and told them what happened. They told him to calm down and they would just send him the forms.
His insurance also uses his gross as one of the factors to calculate his premiums. His past good record doesn't seem to matter.
That's pretty much what the auditor told me. He called me on Friday afternoon and told me he would be there Monday morning at 9:00. I called him back and told him I couldn't do that. He then said he would call back and reschedule later. I was talking to my insurance agent yesterday and he said the insurance companies are auditing now more than they used to. He said a man that had a campground insured with him for over 20 years and had never been audited but had gotten the call to be lately.
 

coreya3212

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Feb 4, 2009
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That's pretty much what the auditor told me. He called me on Friday afternoon and told me he would be there Monday morning at 9:00. I called him back and told him I couldn't do that. He then said he would call back and reschedule later. I was talking to my insurance agent yesterday and he said the insurance companies are auditing now more than they used to. He said a man that had a campground insured with him for over 20 years and had never been audited but had gotten the call to be lately.
If you raise a huge fuss and get a new carrier, they will probably audit you next year anyway. Might be less painful to just reschedule and give them what they want. I agree its frustrating, but in the end, it may just be our pride that gets in the way on something like this. Good Luck either way.
 
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Chandler

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If you raise a huge fuss and get a new carrier, they will probably audit you next year anyway. Might be less painful to just reschedule and give them what they want. I agree its frustrating, but in the end, it may just be our pride that gets in the way on something like this. Good Luck either way.
Update! Talked to a lady at the main office of my insurance company today. I explained my situation and she was very understanding. She said we could do a paper/mail audit and she would contact the auditor (private contractor) and tell him that she would handle it. The insurance companies don't have a clue about who they are insuring. I could have 10-20 people working on my payroll and bringing in $100,000 a year as far as they know. I told her that I have a small business and that I work another job also and that my time is limited. I told her that I could work on a paper audit in my spare time instead of having to meet someone in the middle of the day. It's usually just my son and me. Anyway I'm thankful that it has worked out better. The Good Lord does still hear prayers! I do understand a little more why they do an audit now. They just want to know what risk they are taking with your business and how it has changed since the policy was taken out. Then they adjust the policy according to that.
 

Tazza

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Update! Talked to a lady at the main office of my insurance company today. I explained my situation and she was very understanding. She said we could do a paper/mail audit and she would contact the auditor (private contractor) and tell him that she would handle it. The insurance companies don't have a clue about who they are insuring. I could have 10-20 people working on my payroll and bringing in $100,000 a year as far as they know. I told her that I have a small business and that I work another job also and that my time is limited. I told her that I could work on a paper audit in my spare time instead of having to meet someone in the middle of the day. It's usually just my son and me. Anyway I'm thankful that it has worked out better. The Good Lord does still hear prayers! I do understand a little more why they do an audit now. They just want to know what risk they are taking with your business and how it has changed since the policy was taken out. Then they adjust the policy according to that.
Glad they were understanding and are happy to work in with you.
 

sandhills-elect

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Sep 26, 2007
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That does sound like a reasonable alternative for all concerned. Good to have a good broker on your side.
My insurance agent comes around once a year or calls and talks, i did not know you could get inusurance without an agent and some kind of guidlines of a business. I can understand why they would want that info, but why not get it before the policy is wrote up, could be alot of changes good or bad after the fact. Well live and learn, glad to here you have it under control. God speed. Later Brent.
 
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Chandler

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My insurance agent comes around once a year or calls and talks, i did not know you could get inusurance without an agent and some kind of guidlines of a business. I can understand why they would want that info, but why not get it before the policy is wrote up, could be alot of changes good or bad after the fact. Well live and learn, glad to here you have it under control. God speed. Later Brent.
I do have an agent. I just went ahead on my own and called the main office. After the fact, I told my agent and he was okay with it. He said they probaby would rather hear my situation straight from me rather than him. He is a good agent and is good to deal with.
 

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