With the end of the year behind us, many businesses are preparing for year-end reporting of payroll and other employee reports.

These reports and other financial information are requested of insurance policyholders of policies such as:

• New York State Workers Compensation
• New York State Disability Benefits (DBL) and Paid Family Leave (PFL)
• Other General Liability policies

Why is an insurance company requesting this information, and why is it relevant to your business insurance?

There are two reasons this information is essential and relevant:

1. Risk Exposure and Final Premium Determination: The basis for developing a premium commensurate with the risk your business and employees pose for the losses covered.
2. Because these policies pay for injuries and lost wages, the loss exposure is more significant for businesses with greater numbers of employees and those engaging in more hazardous workday activities.
3. New York State Regulations: NYS regulations. New York Insurance law requires that insurance companies perform audits promptly following the renewal date of workers' compensation and NYS DBL/PFL policies. Regarding Workers' Compensation, these audits may need to be completed in person every three years, with other renewals done electronically or through the mail.

How is this employee payroll information used concerning your insurance policies?

Workers Compensation:

Rating Basis: Payroll is the rating basis for all workers' compensation policies. Within the same classification of workers, an employer with twenty employees pays more for workers' compensation than an employer with one employee. Each employee’s gross pay and primary work classification are used to develop the final rate. Following the results of an audit, premiums are either increased or decreased when compared to what was estimated for the year.

New York State Disability Benefits Law (DBL) and Paid Family Leave:

Rating Basis: New York DBL is rated based on the number of male and female employees on your payroll. Because this policy pays for lost wages due to off-the-job injuries or illnesses, rates for DBL are driven by the gender of employees. One rate is for all males, and another is for all female employees. The difference in rate is mainly because females may opt for disability during pregnancy.

On the other hand, New York Paid Family Leave is consistently rated by payroll. The rate is the same between genders and is set yearly by the New York State Department of Financial Services.

General Liability Policies:

Rating Basis: Depending on the type of business operations, general liability policies can be rated based on:

• Payroll
• Gross Receipts
• Other pertinent measurable factors

The primary reason for insurance audits is based on the desire to charge a premium that reflects the risk of loss that the business faces. Though the audits create additional work for you, it is a necessary step in determining an appropriate rate for your operation.

If you have questions about an upcoming audit, please consider our team happily at your service to help answer questions and concerns.