Commercial Lines - Audit
Premium Adjustment by Audit
Premiums for commercial insurance protection are reflective
to the activities of the business being insured.
Due to constant change in the business world, however,
it is difficult to predict how a business will perform in any given year.
Thus, premiums are commonly estimated at inception and adjusted at the end of
the term via an audit of the business’s activities.
How Does the Audit Work?
Depending on the type of coverage provided, premiums may be based on payroll, number of employees,
sales, total cost or automobile coverage. Premiums are set by estimating activities or changes in one of these aspects.
At the end of the policy term, an audit is performed to determine actual business results.
If activity was greater than projected, additional premium will be charged.
If activity was less than projected, premium will be returned (subject to application of any minimum premium).
What Types of Audits Can I Expect?
One of three types of audits may be performed based on the exposure size and complexity
of a business and its operations. Our company determines the type of audit.
- Physical — An auditor completes an on-site examination of the financial records of the business and obtains information to complete the audit.
- Telephone — An auditor calls the policyholder to obtain information needed to complete the audit.
- Mail — The policyholder completes a form and returns it to Frankenmuth Insurance. This is also known as a voluntary audit.
Preparing for the Audit
An audit can be a simple process when thorough and accurate records are maintained.
Through preparation, an audit can be conducted quickly with minimal disruption.
Review of your financial information is treated with the highest degree of confidentiality.
Records necessary for an audit may include:
- Payroll journal and/or individual payroll records
- General ledger
- Check register or cash disbursement journal
- Quarterly State Unemployment Reports and Federal Tax Reports – 941’s
- Annual Federal Tax Return
- Sales & receipt journals
- Certificates of Workers’ Compensation & Liability insurance
for Temporary Labor
If you have any questions concerning the premium audit process, please contact your agency.
We want to ensure your premiums are both fair and accurate.
Our audit process does just that! See the following guide for greater detail: