Insurance is necessary, and often required, for a business to protect themselves from risk. There are many unforeseen costs that can arise during operations, including accidents, natural disasters, and lawsuits from both customers and employees. Business owners are heavily encouraged to purchase insurance to protect themselves from financial ruin. However, it is possible that businesses can be charged an incorrect insurance premium amount, because it is determined based on estimations of the business’ risk exposure. This estimate includes inputs such as the estimated payroll, business operations, and losses, but it is not foolproof. In fact,
There are other variables that can affect the outcome of the final premium, including: auditor bias, actual premium bias, proper classifications, and rates that apply to the specific business. Insurance premium audits are essential to making sure that this estimate is course corrected from any inaccuracies and business owners pay an insurance premium that is reflective of their actual risk. If the business is undercharged, they will be required to pay the difference. If they are overcharged, they will receive a refund in the form of a policy credit. Usually, these audits occur on an annual basis, after the policy expires. There are some subsequent mid-term audits that may take place as well after expiration.
Changes to the Insurance Premium Audit Space
The current audit process involves extensive document review from auditors employed by the insurance company, but the subject of the audit, the company itself, typically doesn’t have a lot of visibility into this process. The auditor will typically reach out to a company representative through a virtual call, phone call, or by email. They will then review documents concerning who works for or is contracted by the company. This involves payroll, cash disbursements, federal and state income taxes, and cash receipts. After the audit has been completed, a final statement will be provided. Usually a company only receives a full report if they request it. Based on the results of the audit, the company will be sent a bill or credit.
This process is experiencing some major changes with the rise of artificial intelligence. AI can help auditors detect anomalies in the documents and predict relevant premium trends, impacts, and risks. It can also double check data accuracy and reliability, which reduces the likelihood of inaccuracies. With less inaccuracies comes less expensive surprises for the insurance company or the business itself. This technology has been configured to be compatible with all of the typical formats that an auditor usually uses to contact a company, including video and phone calls, emails, and web-based portals.
Conclusion
It is recommended that companies spend the extra money and hire an expert auditor that can assist with this important process. They are able to be the point of contact with the insurance company and make sure that errors and overcharged premiums are minimized. A business should never pay more than they owe, and expert auditors are a surefire way to guarantee this.
