Policy Audit Procedure

The insurance industry utilizes several different units of exposure as a basis of measuring an appropriate premium charge for business liability coverages.

Examples are payroll, sales, and premises area. Because a client can only estimate some of these costs for the coming year, the insurance company charges a deposit premium based on the policyholders estimate of same. It is a policy condition that an audit of the policyholder’s records shall be performed by the insurance company after the policy anniversary or expiration date. At that time a premium charge or credit will be computed based of any differences between the estimated and actual year end units of exposure.

IMPORTANT: It is your best interests to retain a copy of the auditor’s worksheet so that if any question arises when you receive a possible audit premium charge or credit, you will have a copy of the information the auditor gathered from your records with which to compare.

One additional note: If the basis of premium on your policy is payroll, remember that any overtime payroll you have is treated as regular time for the purposes of premium computation.