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Insurance audit changes

  • 1.  Insurance audit changes

    Posted 10-01-2020 13:00
    Has anyone suffered an General Liability audit where the auditor changed its methodology?  For two prior plan years, the auditor used Labor only to calculate the premium.  This last year, they added Material costs, too, increasing our premium significantly because it was a good year (unlike the other plan years).  

    Auditor "advised they overlooked the materials on the 18-19 term, they didn't intentionally 'excluded" them.  It wasn't much which is consistent with your sales figures so it wouldn't have made much of a difference."
    --
    Glenn Chinn, Managing Principal
    Studio 1Thousand LLC
    6036 Upland Terrace South
    Seattle, WA 98118
    glenn@studio1thousand.com
    206-723-4710


  • 2.  RE: Insurance audit changes

    Posted 10-02-2020 06:16
    I agree that doesn't sound correct.  General liability premiums are usually based on sales (billings) and occasionally based on field labor.  I've never seen materials used as an exposure item.  My advice is to look at the declarations page of the policy for the year in question.  It will have the earned premium basis on it.  I would also get your insurance agent / broker involved immediately.

    Good luck,

    ------------------------------
    Joseph Gravenstine CPA
    Controller
    National Glass and Metal Co., Inc.
    Philadelphia PA
    (215) 938-8880
    ------------------------------

    Original Message


  • 3.  RE: Insurance audit changes

    Posted 10-06-2020 15:45
    Joseph, here is an update on my questions about GL premiums: I followed up your advice and reviewed my policy.  While the Declaration page shows the basis to calculate the premium for Contractors/Subcontractors, more to the point, this year's policy included an Exclusion for Contractors/Subcontractors.  Previous policies always included a Contractors Special Conditions that required us to deliver insurance certificates and then charged us a premium based on how much we paid out.  

    We are waiting for our broker's guidance here and are cautiously optimistic that my question is not applicable and what we paid contractors is moot.

    Thanks for your support.
    --
    Glenn Chinn, Managing Principal
    Studio 1Thousand LLC
    6036 Upland Terrace South
    Seattle, WA 98118
    glenn@studio1thousand.com
    206-723-4710



    Original Message


  • 4.  RE: Insurance audit changes

    Posted 10-02-2020 08:05

    Suggest looking closely at your policy to see what the basis for the premium is.




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  • 5.  RE: Insurance audit changes

    Posted 10-06-2020 15:48
    Lawrence, here is an update on my questions about GL premiums: I followed up your advice and reviewed my policy.  While the Declaration page shows the basis to calculate the premium for Contractors/Subcontractors, more to the point, this year's policy included an Exclusion for Contractors/Subcontractors.  Previous policies always included a Contractors Special Conditions that required us to deliver insurance certificates and then charged us a premium based on how much we paid out.  

    We are waiting for our broker's guidance here and are cautiously optimistic that my question is not applicable and what we paid contractors is moot.

    Thanks for your support.
    --
    Glenn Chinn, Managing Principal
    Studio 1Thousand LLC
    6036 Upland Terrace South
    Seattle, WA 98118
    glenn@studio1thousand.com
    206-723-4710



    Original Message


  • 6.  RE: Insurance audit changes

    Posted 10-02-2020 10:03

    Yes I have successfully challenged an insurance audit on more than one occasion. The key is knowing your policy and how the premiums were originally calculated. Your policy and premium are your contract with the insurance company and if the items the auditor is trying to "after the fact" include are not part of that contract you don't have to now agree to them. Your premiums were based on estimates and your audit on actuals. During your renewal did you or your agent truly break down what the premiums consist of.  Your policy should have rate sheets that assist you in doing this. Can you take their information, knowing all the factors involved, and come to their estimated premium number. Can you now take their information and use your actual numbers. Review your policy and find the section on audits; does it spell out what is included or how it will be calculated. I never go into an audit without first doing my own internal audit; therefore I know what to expect and also have my documents to back me up. Never accept an audit without first getting copies of their audit worksheets that detail how they calculated your audit premium OR CREDIT.  (I tell the auditor before the audit begins that I will review their worksheets before I sign off on the audit). Also, your agent works for you, so get him/her on board with you and just stand firm that you will not accept the results based on your policy/contract.

     

    I've also found that over the years, having already pre-audited, that if an auditor misses something that I should have paid I will show that to them. Most times they thanked me for my honesty and didn't go back to charge us; thus when I disagree with something, they tend to listen to me.

     

    Vicky Hinesley, Controller

    2139 Canady Ave.

    Nashville, TN 37211

    vhinesley@cochristian.com

    615-254-3491 Ext. 522

    COC_Logo

     




    Original Message


  • 7.  RE: Insurance audit changes

    Posted 10-06-2020 15:49
    Vicky, here is an update on my questions about GL premiums: I followed up your advice and reviewed my policy.  While the Declaration page shows the basis to calculate the premium for Contractors/Subcontractors, more to the point, this year's policy included an Exclusion for Contractors/Subcontractors.  Previous policies always included a Contractors Special Conditions that required us to deliver insurance certificates and then charged us a premium based on how much we paid out.  

    We are waiting for our broker's guidance here and are cautiously optimistic that my question is not applicable and what we paid contractors is moot.

    Thanks for your support.
    --
    Glenn Chinn, Managing Principal
    Studio 1Thousand LLC
    6036 Upland Terrace South
    Seattle, WA 98118
    glenn@studio1thousand.com
    206-723-4710



    Original Message


  • 8.  RE: Insurance audit changes

    Posted 10-02-2020 10:07

    Hi,

    I am of the understanding that G/L insurance premium is based on labor costs.  At least that is how our premium is calculated.  I know there are other ways to come up with  premium but I believe labor costs is the most common.  I would check to determine if that is the case.  If so, it doesn't make sense that they can change the methodology. 

     

     

    Eileen Moran

    President and CFO

    Moran Electrical Contracting

    12549 S. Holiday Drive

    Alsip, Illinois 60803

    Ph: 708.597.9011

    Fax: 708.597.9012

    emoran@moranelec.com

    www.moranelectrical.com

     

     

     

     


    Virus-free. www.avast.com



    Original Message


  • 9.  RE: Insurance audit changes

    Posted 10-06-2020 15:52
    Eileen, here is an update on my questions about GL premiums: I followed up your advice and reviewed my policy.  While the Declaration page shows the basis to calculate the premium for Contractors/Subcontractors, more to the point, this year's policy included an Exclusion for Contractors/Subcontractors.  Previous policies always included a Contractors Special Conditions that required us to deliver insurance certificates and then got charged  a premium based on how much we paid out.  

    We are waiting for our broker's guidance here and are cautiously optimistic that my question is not applicable and what we paid contractors is moot.

    Lessons learned: review each policy renewal for changes and for questions regarding premium calculations.

    Thanks for your support.
    --
    Glenn Chinn, Managing Principal
    Studio 1Thousand LLC
    6036 Upland Terrace South
    Seattle, WA 98118
    glenn@studio1thousand.com
    206-723-4710



    Original Message


  • 10.  RE: Insurance audit changes

    Posted 03-19-2021 10:57
    GL policies are typically based on Payroll or Sales. The audit should be straightforward. Ensure you are accruing as you go along for any additional premium that will be paid.

    ------------------------------
    Clark Taylor CPA
    Executive Vice-President
    Southern Development and Construction, Inc.
    Oviedo FL
    (601) 317-4066
    ------------------------------

    Original Message


  • 11.  RE: Insurance audit changes

    Posted 03-20-2021 10:49
    Glenn:
    The GL premium basis and rate(s) should be clearly stated in your policy, and any deviations from those terms should be unacceptable just like they would be in any other contract.  I would appeal the audit results.
    I agree with Clark's recommendation to monitor your current policy experience throughout the policy year, especially in the first several months.  If you foresee a significant difference from what you estimated for sales or payroll at renewal your broker might be able to get your carrier to re-underwrite the policy to reflect a more likely scenario that might result in a lower premium.  In any case, there should never be surprises upon audit unless your accrual was incorrect.

    ------------------------------
    Kenneth Zylstra CPA, CGMA, CCIFP
    Senior Vice President & Chief Financial Officer
    Imperial Contracting LLC
    Scottsdale AZ
    (480) 892-9157
    ------------------------------

    Original Message


  • 12.  RE: Insurance audit changes

    Posted 03-22-2021 07:38

    Review your policy documents.  The base for your policy should be specified there.  Get with your Agent to assist.

     

     

     

    Kathy Moore | CFO | glass|stream | 770.428.8599 x 203

     

     




    Original Message


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