The standard workers’ compensation policy mandates that an employer must provide the insurance carrier with all records necessary to determine premium. When an employer does not allow the insurance carrier to examine and audit its records, the final earned premium cannot be determined accurately.
In an effort to standardize procedures in the event of employer noncompliance with at least two records requests, most states* have adopted an “Audit Noncompliance Charge” endorsement, WC 00 04 24, that may be attached to workers’ compensation policies beginning with Jan. 1, 2017 new and renewal policies. (State exceptions are listed below.) This endorsement specifies the applicable state(s) and audit noncompliance charge (ANC) that may be applied to determine the final policy premium.
It is important to recognize that the “charge” is in addition to the estimated annual premium. For example:
Estimated annual premium $5,000
Audit noncompliance charge $10,000
Final annual premium $15,000
Most employers voluntarily provide their records, thus avoiding any need to apply an ANC during the audit process. If a noncompliant employer subsequently provides the appropriate records, the final earned policy premium will be determined using actual payroll/remuneration and any ANC will be withdrawn.
An employer that pays the ANC without providing their records may still be subject to cancellation or nonrenewal of existing workers’ compensation coverage due to noncompliance with policy conditions.
Workers’ compensation manual rules include more specific criteria applicable to ANC. If you have any questions or concerns about this change, please contact Professional Insurance Programs at 800-637-4676.
*State exceptions:
Wisconsin – The policy endorsement and uniform charge of twice the estimated annual premium in the event of audit noncompliance are mandatory.
