WCIRB Premium Audit Accuracy Program

The WCIRB Premium Audit Accuracy Program (PAAP) establishes minimum auditing standards for monitoring insurer performance, improves audit proficiency through evaluation of insurer auditing practices, and provides oversight of an insurer’s premium audit practices to ensure audit rules are applied consistently across all California employers. This program, together with a variety of other approaches the WCIRB uses to ensure that timely, complete and accurate unit statistical report (USR) data is used in experience modifications, advisory pure premium rates and research, aligns with the WCIRB’s objective of targeting the most effective methods for maintaining high standards of data quality while minimizing the manual touchpoints associated with the exchange of data.

Part 1 of the PAAP requires the WCIRB to initiate test audits to ensure the accuracy and reliability of insurers’ payroll audits as well as the accurate reporting of exposure and claims classifications pursuant to the California Workers’ Compensation Uniform Statistical Reporting Plan–1995 (USRP) and the accurate application of experience modifications by insurers.

In Part 1 of the PAAP, policies are eligible for test audit selection if the unit statistical report (USR) has been submitted with a final premium meeting the physical audit requirements of the USRP and exposure reported as audited. Exposure and claim classifications reported on USRs selected for test audit are then reviewed for compliance with program provisions.

Part 2 of the PAAP consists of the “Unaudited Payroll” data quality metric that assesses an insurer’s premium audit proficiency by determining the percentage of USRs requiring physical audit that are submitted with payroll reported as unaudited.

Part 3 of the PAAP ensures timely and complete responses to classification ratemaking data validations for USR data that may significantly impact the WCIRB’s calculation of advisory pure premium rates. 

Quarterly reports are released to participants to provide a comparison of insurer’s results against acceptable standards under Parts 1 and 2 of the program. Insurers that do not meet specific performance standards of the program or provide timely and complete responses to data inquiries are required to take corrective actions and may be assessed fines.

A summary of the WCIRB Premium Audit Accuracy Program is provided in the chart below:

WCIRB Premium Audit Accuracy Program
Part 1: Test Audits of Payroll and Claims Classification Reporting

SelectionRisks Eligible for Test AuditUSRs submitted for policies requiring physical audit and reported with audited exposure – up to 22 months after policy inception
Reportable DifferencesData ReportingA physical audit was required but not performed
 TimelinessRequired audit materials are not submitted within 30 days following the due date
 ExposureSum of absolute pure premium difference for each standard classification exceeds 5% of total insurer pure premium
 Claims ClassificationMore than 10% of claims test audited are assigned to incorrect classification(s) (no more than 20 of the largest compensable claims are subject to test audit)
 X-ModPremium invoice applies the wrong experience modification
FinesLate Audit Material Submission$200 one-time fine if not submitted by the due date
 Late Corrected USR Submission$500 monthly fee for post-test audit USR corrections not received within (1) 30 days following WCIRB notification to submit a corrected USR (issued 60 days following publication of test audit report with reportable difference(s)) or (2) 30 days following WCIRB’s response to a test audit protest upholding the reportable difference(s)

WCIRB Premium Audit Accuracy Program 
Part 2: Physical Audit Compliance

Unaudited Payroll ReportingMetricPercentage of original first report level USRs for policies required to be physically audited but reported as unaudited
 Tolerance5% over a four-quarter period, based on a minimum of 15 USRs with unaudited payroll

WCIRB Premium Audit Accuracy Program 
Part 3: Classification Ratemaking Data Validation

SelectionData InquiryA Classification Ratemaking Data Validation Inquiry (Inquiry) on USRs that may significantly impact to advisory pure premium ratemaking
FinesDelinquent Inquiry ResponseAn inquiry that has not received a complete and satisfactory response within 60 days will be subject to a fine of $150 per calendar day until the required response is received, subject to a maximum fine of $6,000.

If you have any questions regarding the program, please contact the WCIRB Data Quality Assurance Office at [email protected]