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Today's
premium
auditors
seem to be
missing the
full intent
of their
position
within the
insurance
industry.
Any
successful
carrier
knows the
value of a
premium
auditor does
not lie in
just
classifications
and numbers.
The primary function of a premium auditor is the verification of
the policy contract and then the development of classifications
and exposures. In fact, classification and exposures can
not truly be developed until the policy contract has been
validated. Typically, the premium auditor is the only
person from the company to meet with an insured. The
premium auditor is the only person to access and review all the
documents and records of the insured and the only individual
with the ability to verify the contract contains legally
accurate information.
What are the
professional
and legal
obligations
of an
insurance
premium
auditor?
Basic
premium
audit
industry
practice
states that
an audit
must be
completed in
accordance
to the
applicable
state manual
rules,
federal laws
and acts
and, the
contractual
conditions
of the
policy.
This is a
strict legal
responsibility.
Insurance manuals
and policies are
not
guidelines
or suggested
audit
procedure
but a
compilation
of their
respective
state laws
and rules as well as contractual law.
Working with
these labor,
insurance
and contract
laws the
insurance
premium
auditor
reviews the
books,
records and
other
necessary
documents of
policyholders,
accountants,
insurance
carriers and
other
concerned
parties.
From this
review the
auditor will
produce a
written
report
verifying
policy
information
such as
named
insured’s,
entities,
ownership,
combinability,
locations of
operation
and a host
of other
information
necessary
for
establishing
insurability.
Once
insurability,
the absolute
requirement
in order for
there to be
an insurance
policy,
has been
verified and
documented the
auditor will
establish
the classification
of the operations conducted and produce a basis of premium (exposure) from which policy premiums will be determined. Upon completion of these activities the
entirety of
this
information will become a part of the contract (the policy) between the carrier and the insured and the premiums due
become legally collectable by the carrier.
It's a shame
that so many
of today's
"premium
auditors"
are nothing
more than
gatherers of
numbers with
no real
knowledge of
the industry
in which
they work
nor how the
function they
perform
impacts so
many
different
business'
and lives.
Premium auditors must be
trained and must
understand
how the
coverage,
conditions
and
obligations
within
the contract
affect the premium audit process and
how the
development
of
classifications
and
exposures
rely upon
those
factors.
These
individuals
should be
taught more
than
auditing for
premiums;
they should
be taught
their
profession.
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