Take the right route to protecting your business—Marsh offers DSPs competitive Workers’ Compensation (WC) coverage through our DSP Insurance Program to cover medical costs and lost wages for slips, trips, and falls. The DSP Insurance Program is designed to help DSPs like you manage your business insurance requirements.
A major part of Workers’ Compensation coverage is the WC audit that occurs for DSPs. Below we outline the big picture of what this audit is and what it means for DSPs.
What is a Workers’ Compensation audit? A Workers’ Compensation audit is when your insurance carrier will request to review your actual payrolls for the previous year under your expired policy. Your insurance carrier has access to DSPs estimated payroll reporting for the previous year, but this is an opportunity for us to compare actual vs. estimated payrolls.
When does a Workers’ Compensation audit occur? Audits will occur roughly 3-6 months after the expiration of your WC policy. For example, if you policy is effective 1/1/2021 and expires 1/1/2022, you can expect the audit to occur between March-June 2022.
Why are Workers’ Compensation audits performed? Audits are performed to ensure DSPs are paying the correct amount for coverage based on their payroll for the previous year. If DSPs under report payrolls at the beginning of their policy, DSPs will owe money in order to have the correct coverage. If DSPs over report their payroll for the previous year, DSPs will receive a refund. The audit allows us to perform a “checks and balances” exercise. If it is your first year as an active DSP, it may be hard to estimate what your payroll is going to be as you are new to the business. For example: if you start with 5 drivers, you can estimate their payroll throughout the year, however, if your business grows to 25 drivers in the middle of the year, it gets harder to estimate what that payroll amount will be which could lead to a surprise at the time of audit.
Four ways to avoid surprises at the time of audit:
- Marsh encourages DSPs to be diligent about reporting your actual payroll amounts to the insurance companies. This will help minimize the amount of “estimates” that are provided, and be in favor of actual payroll amounts. Reach out to your regional account team to report your actual payrolls each month.
- When changes in operations for your DSP business occur, for example—if you have 50 routes but negotiate an additional 15 routes halfway through the year, resulting in more employees and more payroll, understand that this may affect your budget for the additional payroll or cost implications at the time of audit.
- Workers’ Compensation and payroll estimates are not an installment plan over the course of your 12-month coverage. Typically, DSPs estimate their payroll for the year and divide that by 12 (months), but forget to go back, check and provide accurate payroll information given changes in payroll for peak season, or changes in the number of employees.
- Don’t forget—DSPs can request an interim audit. Even though these interim audits are not mandated, DSPs can still come to Marsh with their fluctuating payrolls and request Marsh to re-estimate to let the DSP know if they are “ahead” or “behind” from the estimates provided at the beginning of their coverage. Reach out to your regional account team at Marsh to request an interim audit.
Workers’ Compensation coverage can be tricky, but that is why Marsh’s dedicated team of insurance experts are here to help DSPs like you.