Insurance premium auditing is a process every business is subject to if they have an insurance policy. A company is assigned a premium rate based on both quantitative information, like classifications and actual premium basis, and qualitative elements, such as auditor bias. These premium rates are determined by estimating the amount of insurance exposure by investigating their payroll, business operations, and losses. On an annual basis, usually after the policy has expired, the business will then be audited to see if its actual exposure risk was in line with the premium it paid.
These audits are usually carried out once a year following the expiration of a policy. Businesses incur additional premium fees if the initial estimates are too low; if they are too high, they are refunded with checks or credits. Inaccurate audits can be very expensive, with 10–20% of the $60 billion yearly premium market lost to premium leakage and 25–50% of business owners facing overcharges.
The auditing process begins with an auditor contacting the company to examine their financial information, such as payroll records, tax returns, and cash disbursements. This assessment could be done in person, over the phone, or electronically. AI is currently being implemented throughout the auditing process, especially being used to verify the accuracy of data.
