OSIP Audit Unit


Audit Methodology and Random Selection


To ensure uniformity in compliance of reserving and claims handling practices of workers’ compensation claims for self insured employers and to achieve our mandate to audit all private self insured employers every three years, pursuant to Labor Code Section 3702.6, routine audits that start on or after July 1, 2014 will be conducted using a two phase audit program.

Phase I will consist of a desk audit completed by the Northern and Southern California Audit Supervisors.  The desk audit will identify private self insured employers who should be targeted for field audit, Phase II.

Phase II, the field audit, the OSIP Audit Unit reviews a sample of open files, closed files, and files that were denied within the last twelve months preceding the audit.

The sample of open files are randomly selected and are based on the population of the open indemnity claim files for the annual year reported. The number of indemnity claims randomly selected for audit is based on the table set forth in CCR§10107.1(c)(1). In order to assure true random selection, the OSIP Audit Team uses a program that randomly selects the files to be audited. If problems are noted that require a bigger sample, then the size is increased in accordance with 8CCR§10107.1(d)(1).

The Auditors review the claim files for both over and under-reserving of future liabilities. The amount of over and under-reserving of future liabilities are divided by the amount of reported future liabilities in the annual report for the claim files reviewed.

The audit findings will be taken into consideration upon receipt of a complete actuarial study and regulatory actuarial summary report due no later than May 1 of each year  pursuant to 8CCR§15209(a) for private employers who are self insured and due no later than April 15 of each year for self insured groups pursuant to 8CCR§15481.



February 2020