Regulatory Expectations for Payroll Audit Practices Under Workers’ Compensation and Employer’s Liability Policies

♦INSURANCE.DELAWARE.GOV♦ 1351 W. NORTH ST., SUITE 101, DOVER, DELAWARE 19904 (302) 674-7300 DOVER♦ (302) 259-7554 GEORGETOWN♦ (302) 577-5280 WILMINGTON TRINIDAD NAVARRO COMMISSIONER STATE OF DELAWARE DEPARTMENT OF INSURANCE DOMESTIC AND FOREIGN INSURERS BULLETIN NO. 159 AND PRODUCER AND ADJUSTER BULLETIN NO. 38 TO: ALL CARRIERS AUTHORIZED TO WRITE WORKERS’ COMPENSATION AND LIABILITY INSURANCE IN DELAWARE AND OTHER INTERESTED PARTIES RE: REGULATORY EXPECTATIONS FOR PAYROLL AUDIT PRACTICES UNDER WORKERS’ COMPENSATION AND EMPLOYER’S LIABILITY POLICIES DATED: October ____, 2025 The Delaware Department of Insurance (the “Department”) issues this Bulletin to clarify and establish expectations regarding payroll audit practices for workers’ compensation and employer’s liability insurance policies. Pursuant to 18 Del. C. § 2624, carriers are required to include rules and practices related to payroll audits and premium collection as part of their rate filings. The Department expects carriers to maintain transparent, consistent, and accessible audit procedures that support fair premium billing and timely resolution of audit-related inquiries. Background This Bulletin is issued in response to concerns raised by industry stakeholders, including insurance agents and insured businesses, regarding current practices surrounding payroll audits and premium billing. The Department has identified the following recurring themes that warrant regulatory guidance: • Delayed access to audit documentation: Insureds and agents frequently report difficulty obtaining audit documentation in a timely manner, particularly when carriers do not provide online access to these materials. The absence of secure, digital access to audit records, including historical worksheets, billing notices, and correspondence, limits transparency and delays resolution. • Automatic payment arrangements create timing and cash flow concerns: Businesses may not receive audit documentation in time to review charges before funds are withdrawn. Businesses not enrolled in auto-pay risk cancellation for non-payment if audited premiums are not paid by the due date, even when disputes are pending. • Insurance agents face barriers when assisting insureds: Many carriers require formal authorization from the insured before releasing audit information. This causes delays and impedes timely resolution. 20 • Premium corrections: Insureds are often required to pay the full audited premium upfront, even when errors are suspected. Many carriers do not reverse audit bills once issued; instead, corrections are typically applied as credits to future billing cycles rather than as immediate refunds. These obstacles have created inconsistencies across the industry and placed undue administrative and financial burdens on Delaware businesses. The Department is therefore recommending minimum standards to promote transparency, consistency, and consumer protection in the audit and billing process. This guidance is consistent with the Department’s authority under 18 Del. C. § 2611, which allows disapproval of rating practices that result in unfair premium outcomes. Department Expectations • Audit Documentation Transparency: Carriers should include copies of all worksheets, calculations, and supporting documentation that justify the audited premium amount with the audit bill or notice issued to the insured. This documentation must clearly outline the basis for any changes in premium and provide sufficient detail to allow the insured to understand and verify the audit results. • Online Access to Audit Materials: For carriers that maintain online portals, all audit-related documents should be made accessible to the insured through secure digital access. This includes historical audit records, billing notices, worksheets, and any correspondence related to the audit. Carriers must ensure that their digital platforms are equipped to support secure and continuous access to these materials. • Refunds for Overpaid Audited Premiums: When an audit results in a premium correction that reduces the amount owed, carriers must issue a direct refund of any overpaid amount rather than applying the credit to future billing cycles, unless the insured expressly requests otherwise. This ensures timely restitution and avoids unnecessary financial burden on the insured. Premium refunds must be issued using the same method by which the original premium was paid. If that method is unavailable, the refund shall be made by check or another payment method mutually agreed upon by the insured and the carrier. • Agent Access and Permissions Standardization: The Department expects carriers to treat agent requests with the same urgency and transparency afforded to insureds. Carriers should implement a standardized process that allows licensed insurance agents to promptly assist insureds in obtaining audited payroll documentation. This process should include: o Clear guidelines for agent authorization. o Defined response timeframes for insured support. o Secure transmission of audit materials to authorized agents. • Uniform Premium Payment Timeframe: To ensure consistency across the industry, carriers must provide insureds with a minimum of 30 calendar days to remit payment from the date of NOTE: This Bulletin is intended solely for informational purposes. It is not intended to set forth legal rights, duties, or privileges, nor is it intended to provide legal advice. Readers should consult applicable statutes and rules and contact the Delaware Department of Insurance if additional information is needed. ♦INSURANCE.DELAWARE.GOV♦ 1351 W. NORTH ST., SUITE 101, DOVER, DELAWARE 19904-2465 (302) 674-7300 DOVER♦ (302) 259-7554 GEORGETOWN♦ (302) 577-5280 WILMINGTON Page | 3 issuance of the audited premium bill, unless otherwise specified by contract. Any deviation from this timeframe must be clearly disclosed and justified. Payroll Audit Dispute Process Insureds who wish to challenge the results of a payroll audit may submit an appeal to the Delaware Compensation Rating Bureau (DCRB) during the applicable policy period or within 12 months after policy termination. Detailed procedures for initiating an appeal are available at https://www.pcrb.com/dcrb/classification/appeal_procedure_de.pdf. Carriers that maintain online portals or issue audit-related communications directly to insureds are expected to provide this appeal information in such correspondence. The appeal link should be clearly visible and labeled (e.g., “How to Appeal Your Audit Results”) within digital platforms and written notices, ensuring insureds can easily locate and understand their rights and options. Compliance Carriers are expected to review their current audit procedures and make any necessary adjustments to ensure compliance with the above guidance, including but not limited to submission of updated rule and/or form filings. Questions about this Bulletin should be emailed to compliance@delaware.gov. This Bulletin shall be effective immediately and shall remain in effect unless withdrawn or superseded by subsequent law, regulation or bulletin. ______________________________________ Trinidad Navarro Delaware Insurance Commissioner