Ask ERIE: Why Is My Business Being Audited?

Erie Insurance’s priority is always to do right by you, our valued Customers. Although an insurance audit may seem like bad news, the truth is that it may not be as troublesome as you may think. In fact, it could be beneficial to your business.

If you have workers’ compensation and/or general liability coverage for your business, it’s likely that your insurer will conduct an audit. This common practice helps ensure that the insurance company doesn’t overcharge or undercharge your business for coverage. In the end, you’ll be reassured that your coverage is up to date and you’re paying the proper amount.

The good that comes from an insurance audit

When you purchase your policy, the initial premium charged for workers’ compensation and general liability coverage is estimated using different rating bases as well as the proper classifications and rates that apply to the business and the work during the policy term. Premiums for workers’ compensation insurance are estimated based on payroll. Premiums for general liability insurance are calculated based on different variables, such as payroll, receipts, sales, units and the like.

Throughout your policy term, your sales, payroll and other variables will fluctuate. The audit takes place at the end of the policy period to collect the updated information and calculate your final premium.

For example, if business is better than you expected and you have hired more employees than you planned, your payroll will be higher and you will potentially have a greater exposure for someone to file a workers’ compensation claim. It’s a smart move to reconcile any differences.

What happens if my estimates are not accurate?

Estimates should be as close as possible to the actual amount of payroll and sales incurred during the policy period. If the estimate is too high, you’ll receive a refund, usually a credit to your current policy. If it is too low, you’ll receive a bill for the additional premium for the audit period and the current year.

Who conducts the audit?

The auditor may be an employee of either the insurance company or an independent auditing firm. The size and type of your business determines the type of audit you will receive. The audit usually takes place 60 days after the expiration date of the policy period so that any premium adjustments may be processed into your premium billing cycle.

There are three basic types of audits:

  • Questionnaire audit: You will be mailed a letter that provides a website address and a password that allows you to sign on and complete a questionnaire.
  • Telephone audit: An auditor will contact you by phone and interview you to complete the audit. You will initially receive a letter with a date and a two-hour window when the auditor will call you.
  • Physical audit: An auditor will meet with you in person to complete the audit information.


For questions about the audit process, it’s best to get in touch with a licensed insurance professional like the independent agents who represent Erie Insurance. You can count on ERIE and its agents to help protect your business. Learn more about ERIE’s business insurance coverage and find out why so many people trust ERIE.

An insurance audit can benefit your business. An audit can ensure your coverage is up to date and that you're paying the proper amount. /blog/business-sense-audits Erie Insurance