Which type of insurance policies are most often subject to premium audits?

The focus on premium audits is particularly relevant for commercial lines insurance policies due to the nature of the businesses they cover and the complexity involved in accurately determining the premium amounts. Commercial lines insurance policies often include coverage for a variety of risks that are contingent upon the specifics of the insured business, such as payroll, sales, inventory, and other operational statistics. These figures can change, sometimes significantly, throughout the policy term, necessitating an audit to ensure that the premiums charged reflect the actual exposure to risk.

Premium audits serve to verify the information provided by the policyholder at the time of policy issuance and to assess whether the premium adjustments are appropriate based on the exposure experienced. This is particularly crucial for coverages such as workers' compensation and liability insurance, where the premium is closely tied to the volume of business activities and associated risks.

Other types of insurance policies such as life insurance, pension fund policies, and personal auto insurance generally do not require the same level of scrutiny through premium audits because their premiums are typically fixed and based on established actuarial data instead of fluctuating operational metrics. This inherent difference in how premiums are determined reinforces the understanding that commercial lines insurance is the focus of premium audit processes.