RULE XV – FINAL EARNED PREMIUM DETERMINATION

Final earned premium for the policy shall be determined on actual, instead of estimated, payroll or other premium basis.

The determination of final earned premium is governed by the rules, classifications and PCRB rating values and carrier rating values, subject to modification by applicable rating plans.

The insurance carrier has the right to compute earned premium based on an examination of original payroll records and books of account of the insured, in accordance with Part Five – Premium, Section G (Audit) of the Standard Policy.

Only the classifications shown on a Data Card issued by the PCRB shall be used in auditing the payroll of that employer. The insuring carrier shall contact the PCRB in writing in any instance where the authorized classifications do not describe the employer’s operations as delineated in Rule IV, C. 2. c., Section 1 of this Manual.

1. If the employer does not comply with Part Five—Premium, Section G. (Audit) of the policy, the employerwill be considered noncompliant with the policy terms and conditions. When this occurs, the carrier may apply an Audit Noncompliance Charge (ANC) subject to the conditions in this rule. The charge is determined by applying the ANC multiplier to the ANC Basis shown in the table below:
   

   ANC Basis	ANC Multiplier
   Estimated Annual Premium	Two Times

2. On a multistate policy, the ANC applies only to the exposure in the states where an employer is noncompliant with an audit and where this ANC rule is approved for use
3. The ANC is a premium charge and is applied in accordance with the applicable state premium algorithm. The ANC is not part of standard premium.
4. The application of the ANC is subject to the following conditions:

   a.  Carriers must comply with all applicable state laws and/or regulations related to audits of workers compensation insurance policies.

   b.  The Audit Noncompliance Charge Endorsement is optional. When used, the Audit Noncompliance Charge Endorsement and/or applicable state-specific
   endorsement must be attached to the policy at inception of the policy term being audited.

   c.  The carrier must make two attempts to obtain the audit information and/or complete the audit. At each attempt, the carrier must notify the employer regarding
   the specific required records and the amount of the ANC to be applied if the employer continues to refuse to comply with the audit.

   d. The carrier must adequately document the audit file regarding the above attempts to obtain the required audit information.

5. This ANC rule applies to mail/email, telephone, computer (remote access), and physical audits, unless otherwise provided by state law.
6. The ANC may be applied to guaranteed cost policies as well as retrospectively rated policies.
7. The scenarios listed below may occur and are treated as follows:
   

   If an ANC is applied and the employer….	Then the carrier….
   Pays the ANC and later allows the audit	Performs the final audit and determines the final policy premium based on the results of the audit, and Refunds the ANC to the employer or applies the ANC amount to any outstanding balance on the policy Submits a unit statistical correction report to remove the ANC charge from the previously reported Unit Statistical data.
   Does not pay the ANC but rather later allows the audit	Performs the final audit and determines the final policy premium based on the results of the audit
   Pays the ANC But does not later allow the audit Does not pay the ANC and does not later allow the audit	Does not change the previously reported: Unit Statistical data Noncompliance transactions

    

8. The ANC must be reported, including applicable corrections, in accordance with PCRB’s StatisticalPlan.