Auditing insurance premiums guarantees that companies pay the right rates according to their true risk exposure. Premiums are initially estimates that are based on data from payroll, business operations, and losses. Every year, typically following a policy’s expiration, these estimates are examined to see whether any changes are required. If the first estimate was too low, the company is billed for the difference; if it was too high, they get a return in the form of checks or credits.
Since final premiums are influenced by many factors, including auditor bias, actual premium basis, and proper classifications, auditing is a very important process. Mistakes in these evaluations can be expensive: 10–20% of the $60 billion yearly premium market is lost to premium leakage, and 25–50% of enterprises are overcharged.
When the insurance premium auditing process is carried out, auditors reach out to companies to complete it either virtually, by email, or by phone. They review documents such as payroll records, tax returns, and cash disbursements. Many businesses are increasingly using artificial intelligence (AI) systems to detect data errors and forecast premium trends through predictive analytics. Usually, these AI solutions are compatible with all of the different platforms on which these audit visits are conducted.
