As your client’s business operations change, so may their insurance premiums. To make certain they are paying the correct premium amount an audit is commonly performed—requiring a premium auditor with a high degree of expertise, professionalism and understanding of your client’s business.
Oftentimes, premium auditors are the only in-person interaction a policyholder experiences with a carrier, making it important for brokers to educate clients on the audit process.
Insurance Market Source connected with Susan Kahl, Training & Development Manager at Afirm, a premier provider of premium audits, inspections and risk solutions, to provide insight into the expectations of an auditor—allowing brokers to better prepare clients for a smooth and positive audit experience.
Audit process
The end goal of a Premium Audit is to certify that insurance carriers are properly classifying insureds to ensure the premium rate is correct. Auditors follow a set of regulatory and manual rules, depending on the type of audit and business, which assist them in accurately assigning or recommending the precise classification code.
In order to conduct an audit, premium auditors typically call insureds ahead of time to request that specific records are available at the appointment time. On-site, premium auditors meet with business owners, accountants, or high-level managers to gather additional details.
Brokers and agents can be an important part of the audit process. By knowing the expectations of an auditor, brokers can assist their clients in being better prepared and present themselves as a stronger partner.
The audit process can often result in a bill or a refund to clients, while providing valuable information about business operations. However, on occasion audits may reveal premium fraud. Upon the audit of a policyholder’s documentation, if deception is suspected, premium auditors inform carriers of the possibility and present supporting evidence leading to that conclusion.
Audits are highly specific and are often tailored based on carrier preferences. In addition to Physical Audits, there are Phone and Virtual Audits.
During a phone audit, a letter is sent to the insured with a form to complete and return in a timely manner. Phone auditors will do a follow-up call to ensure the information is correct. Virtual audits are the newest form, where all required records are sent to the auditor through a portal or secure email.
Bring on the brokers
It is likely that policyholders may have questions resulting from the audit. Premium auditors involve brokers and agents in audits in these situations where necessary – especially when it relates to a large variance or disputes with audit results. If, for instance, a payroll audit uncovers that actual pay is 20 percent higher than reported, insureds may question if this discovery will cost them more money in premium. It is not the role of a premium auditor to discuss issues like this, only to report what they have found and refer the insured to their broker or agent.
Involving brokers early and often provides policyholders with accurate information pertaining to their concerns and reduces the likelihood of confrontation.
Additionally, it is common to collaborate with brokers or agents to set up an appointment at the front end. Insureds can occasionally be difficult to schedule for the audit. After multiple unreturned voicemails, it is appropriate for the broker to contact the insured to help setup the appointment. Premium auditors have a small window of time to schedule the audit from the carriers and they need to exhaust all options in setting a date and time. In some cases insureds do not return calls, believing them to be a scam. Involving brokers at this point is critical to confirm the legitimacy of the auditor.
Importance of a premium auditor
Essentially, the duty of a premium auditor is to give carriers peace-of-mind that the proper rate structure is in place.
In recent years, pay-as-you-go policies have begun gaining popularity. These policies let insureds pay premium on a monthly basis, and payroll is submitted each month instead of trying to provide estimated sales for the entire year. Industry changes such as this have shown increased importance of the work of a premium auditor.
Among the larger industry trends is the expanding issues that the Cannabis industry is presenting in regards to premium audit. As more states approve recreational marijuana, auditors have had to work closely with insurance carriers on how to specifically classify a variety of operations. Specialists at Afirm have performed extensive research on this subject to recommend the best path forward for carriers.
Creating a positive experience for clients is significant on every angle, from acquiring coverage to completing premium audits in a timely manner. Brokers and agents can be an important part of the audit process. By knowing the expectations of an auditor, brokers can assist their clients in being better prepared and present themselves as a stronger partner.
