General liability insurance is crucial for protecting staffing agencies from unexpected risks. But how do you ensure that your clients’ coverage is always in line with their actual needs? The answer: annual audits. Annual audits play a key role in aligning staffing liability insurance premiums with their true risk exposure. As an insurance agent, you can guide your clients in preparing for these reviews.
What Is the Purpose of a General Liability Insurance Audit?
A general liability insurance audit aims to verify the accuracy of a staffing agency’s payroll, risk exposure, and other factors that determine premium rates.
Insurers use these audits to ensure that the premiums charged align with the actual risk the staffing agency presents. Since the cost of general liability insurance is often based on payroll and the types of work being done, these audits provide a crucial opportunity to adjust coverage based on real data.
By conducting audits, insurers can confirm whether the staffing agency’s operations match what was initially reported and correct any discrepancies that may have arisen. This step ensures that the staffing liability insurance reflects a fair and accurate assessment of risk exposure, protecting both the agency and the insurer from potential financial surprises.
How Audits Impact General Liability Premiums
The findings of annual audits can have a direct impact on general liability premiums.
If the audit reveals that payroll reports or employee classifications were underreported, the premium may increase to accommodate the higher risk. Conversely, if payroll has decreased or your staffing agency client has made adjustments to reduce its exposure, it may result in a lower premium.
Factors that often influence premium changes include the number of employees, how those employees are classified, and the types of jobs being performed.
For instance, if a staffing firm has added more employees in higher-risk roles but did not report this accurately, it could lead to a significant premium increase during the audit. On the other hand, accurately reporting reductions in payroll or changes to safer job roles could lead to a decrease in premium costs, ultimately benefiting the client.
Helping Staffing Clients Prepare for General Liability Audits
Helping your staffing clients prepare for general liability audits can make a big difference in their coverage outcomes. The following are some key steps to guide them.
Maintain Accurate Payroll Records
Emphasize the importance of keeping detailed payroll records throughout the year. Payroll discrepancies are one of the most common reasons for premium adjustments, with companies committing a 1.2% payroll error rate on average per pay period. Thus, maintaining accuracy will help prevent unpleasant surprises.
Properly Classify Employees
Encourage your staffing company clients to classify employees accurately based on their roles and the type of work they perform. Misclassification can lead to premium hikes, especially if clerical staff and field workers are not properly distinguished.
Ensure Transparency During the Audit
Remind your clients of the importance of transparency during the audit process. They should be prepared to provide clear records and answer any questions to ensure the audit goes smoothly.
By taking these proactive measures, your staffing clients can better prepare for audits and avoid unexpected premium adjustments.
Navigating Audits for Optimized Staffing Liability Insurance
Annual audits are an essential part of maintaining fair and accurate staffing liability insurance premiums for staffing agencies. These audits help ensure that your clients’ coverage reflects their true risk exposure, allowing for adjustments that protect both the staffing firm and the insurer.
By proactively guiding your clients through the audit process, you can help them avoid unexpected costs and ensure they have the right coverage at the best possible price.
Reach out for a quote today to learn how World Wide Specialty Programs can support you in optimizing general liability insurance for your staffing clients.
About World Wide Specialty Programs
For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and are committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.