At Nationwide, we see conducting a premium audit as a necessary step in keeping your business’ insurance at the right level. When a new policy or renewal is originally set up, the premium paid is based on an estimated amount of exposure, such as payroll or gross sales. After the first policy period has expired, we can more accurately price based on actual exposure for the policy period. This is especially important for insurance needs that change throughout the year.
Complying with the audit is important to avoid any unnecessary noncompliance charges. Please reference BR9955 or ST7115 in your new business or renewal packet for more detailed information. See FAQ for additional questions.
Who will conduct the audit?
Within 20 days of the policy expiration date, you will receive an audit notice detailing how you will be audited and further instructions on how to complete the audit, including who will be contacting you and who to contact with additional questions. The audit will be done by one of the following methods:
Mailing a premium audit form called business activity questionnaire and/or notification to you; and
A premium auditor representing our company will call you for a telephone audit of your records; or
A premium auditor representing our company will visit you for a physical audit of your records.
Mailing a premium audit form called business activity questionnaire and/or notification to you to be completed online.
The audit of your records will pertain to the variable factors that apply to your policy. You are assured of complete confidentiality by the auditor and the insurance company personnel.
This process is important to your business - and much easier than you think
As your policy is about to expire, make sure to gather all relevant records and documents to calculate your final premium: payroll, sales, subcontractors, OCIP/Wrap up projects records as well as any additional financial information that will help with determining the correct risk classification and amount for your coverage needs.
Make sure that the records are reflecting the information within your policy period. If you are performing different tasks, make sure a separation of payroll is done by duty, so the appropriate amount is charged for each classification.
In the premium audit notice, we will advise of the method used to perform your audit:
Physical Audit
A premium auditor will visit your business to review the necessary information needed to complete the audit. The auditor will make 4 attempts to conduct the audit: 2 requests to you directly, 1 request to your agent for assistance and a 10-day final warning letter if no information is received.
Telephone Audit
A telephone auditor will contact you by telephone to obtain all relevant audit information. The auditor will make 4 attempts to conduct the audit: 2 requests to you directly, 1 request to your agent for assistance and a 10-day final warning letter if no information is received.
Online Audit
We will mail up to three notices (two audit forms and one nonproductive letter), as needed. An audit Representative may make one follow-up phone call or email if any information is missing.
Mail Statement
A premium audit form and reporting form are sent to you to obtain relevant audit information.
Once the records have been reviewed, our audit team will update your policy accordingly. Once processed, the audit statement will generate the next day with the results and will be mailed to you. The billing impact on the audit period will reflect 14 days after the policy is updated. We may also update your current term policy.
If you see any discrepancies or do not agree with the audit findings, please contact our audit department to start the dispute process.
It is crucial to make sure you cooperate with the audit process.
If the auditor is unsuccessful in obtaining the proper records and/or documentation from you, after we mail you a 10-day final warning letter, we will update your policy with a penalty of up to 3 times the policy premium.
Your policy is usually initially based on estimated exposures. The purpose of the audit is to make sure that we have the actual exposures for the policy period and that you have adequate coverage.
When we mail out the premium audit form, we ask for the appropriate information needed depending on the exposure on your policy: payroll, sales-based, or other. Common financial document requested are payroll records, 941s, W2 forms, Quick books reports, unemployment reports, profit and loss statements.
If your business used subcontractors, we will ask for the subcontractors’ certificates of insurance.
You can start with our audit department at 1-800-243-2890.
Common terms & definitions for premium audits
We've compiled a list of terms and definitions to help you make sense of some of the premium audit terms on our website.
Keep in mind that our terms and definitions are intended for information purposes only, and the way they're interpreted or applied may vary from state to state.
Audit period
The policy period for which you will provide the information for the premium audit.
Casual labor
Work that is not typically in the scope of your normal business operations and does not advance your business. Usually performed on an irregular or one-time basis.
Contract labor
Refers to work done by independently employed workers who have a contract with your business for a limited period of time, use their own equipment and pay taxes on their own.
COI
Certificate of Insurance: a document from an insurance company that a subcontractor uses to prove to your business the existence of his own insurance coverage for a set period of time.
Description of operations
Detailed overview of your business and how it operates, including the industry and type of clients served, the product and/or service offered, and how the product and/or service is delivered.
Federal 941/quarterly reports
Employers who withhold income, Social Security or Medicare tax from employees’ paychecks or who pay the employer’s share of Social Security or Medicare tax file these forms with the IRS to report these taxes.
Gross overtime
The amount paid for hours worked above the employees’ regular 40-hour workweek.
Gross sales
The total amount charged by your business and any other entity operating under your business’s name for all products sold or distributed, all services performed, all dues or fees collected and/or all properties rented, excluding any taxes.
Gross wages/gross payroll
Total compensation paid to employees prior to any deductions. Includes wages or salaries, commissions, paid time off, bonuses, overtime and stipends.
Stop gap
The total gross payroll for all employees and officers/owners as reported on the tax forms during the policy period.
Ownership type/legal entity
The legal structure of your business (corporation, individual, partnership, LLC, LLP, nonprofit and such).
Products underwritten by Nationwide Mutual Insurance Company and Affiliated Companies. Home Office: Columbus, OH 43215. Subject to underwriting guidelines, review and approval.
