A Strategic Heads-Up: The Coming Squeeze on Workers' Comp Audits

To my fellow business leaders and Human Resources professionals in East Tennessee, in your roles, you value predictability. You build budgets, manage cash flow, and forecast labor costs. The last thing any of us needs is a massive, un-budgeted expense bill arriving after the fiscal year has already closed. Yet, for many companies, this is exactly what happens in the form of the annual Workers' Compensation audit.

My name is Andrew Darlington and I have been working with business owners helping them with their insurance since 1997, and as the owner of Veritas Risk Management in Johnson City, I'm reaching out with a strategic heads-up. There is a significant trend in the insurance industry that will directly impact your audits. Insurers are aggressively cracking down on what they call "premium leakage," and it's my job as your risk partner to ensure you are never the one left paying the price.

## The Trend: Insurers are Hunting for "Premium Leakage"

"Premium leakage" is the industry term for the billions of dollars insurers lose each year from inaccurate payroll reports. As an article from *Insurance Business Magazine* recently highlighted, insurers are now using enhanced data and analytics to find these discrepancies. The "good enough" payroll estimate you provided 12 months ago is no longer good enough. They are actively looking to recover that money, and it will come in the form of a sharp, painful audit bill for your company.

As your professional partner, my job is to get you ahead of this. A large audit bill isn't a "cost of doing business"—it's a failure of risk management that started the day your policy was written.

## The HR & Finance Landmines: Where Audits Go Wrong

From my experience helping businesses in Johnson City, Kingsport, Bristol, and Jonesborough, audit shocks almost always come from three critical areas that fall directly under HR, finance, and operational management:

1. Employee Misclassification:

Are your bookkeepers, salespeople, and executives correctly classified under their proper NCCI class codes? Or are they lumped in with your field or manufacturing staff? The premium difference is enormous. A "quote-and-forget" agent often misclassifies, costing you money every single day. We ensure this is correct from day one.

2. The Subcontractor Trap (The Big One!):

This is a major compliance failure I see constantly. Your finance department pays an invoice to a "1099" subcontractor who did work for you. You did not get a valid Certificate of Insurance (COI) from them proving they have their own Workers' Comp policy. When the auditor sees that payment, they will add that subcontractor's *entire payroll* to *your* policy. You will be charged the full premium, often at the highest possible rate. This is a 100% avoidable expense that requires a non-negotiable compliance system for vendor management.

3. Complex Payroll Definitions:

According to Tennessee state rules, payroll doesn't just mean wages. It can include bonuses, commissions, and other remunerations. Conversely, a portion of overtime pay can often be *excluded* from the audit calculation, saving you money. Are you tracking this properly? If not, you are either overpaying or underpaying, both of which are bad for your business.

## The Solution: A Proactive Risk Management Strategy

A "broker" or "agent" just gets you a quote. A true professional partner prevents these problems from ever happening. At Veritas Risk Management, we protect your cash flow and eliminate these surprises. Here's how:

• We Build a COI Tracking System: We don't just tell you to "get COIs." We work with your HR and accounting teams to build a simple, ironclad system for vendor compliance.
• We Conduct Pre-Policy Audits: We analyze your class codes and payroll structure *before* the policy is set, not after, ensuring you're paying the correct, fair price from the start.
• We Deploy "Pay-As-You-Go" Solutions: For most businesses, this is the ultimate solution. We set up your policy to integrate with your actual payroll. Your premium is paid each pay period based on real numbers, not an estimate. This levels your cash flow, and most importantly, it can eliminate the annual audit entirely.

You and your team have better things to do than worry about a surprise bill from an insurer. Our job is to give you that peace of mind.

## Protecting Your Business, Protecting Your People

Your business runs because of your people—from your leadership team to your newest hire. As a business owner or HR professional, you know that protecting your team is part of protecting your business. We believe that protection extends to their families as well.

That's why our professional partnership doesn't stop at the company's front door. We are also experts in protecting your families with comprehensive Home, Auto, and Life insurance. We offer this as a benefit to our business clients, ensuring their personal lives are just as secure as their professional ones.

## Let's Schedule Your Policy Review

Don't wait for that audit notice to land on your desk. Let's be proactive.

Contact us today to schedule a no-obligation review of your current Workers' Compensation policy. We'll identify the gaps and build a strategy to protect your cash flow. We can also provide a full review of your personal Home, Auto, and Life insurance needs. Visit us at VeritasRM.com to get started.