Commercial Lines - Audit

Commercial Lines - Audit

Premium Adjustment by Audit

Premiums for commercial insurance protection are supposed to reflect 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, property value 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 for the policy term. If activity was greater than projected, additional premium will be charged. If activity was less than projected, premium will be returned (subject to any minimum premiums that may apply).

What Types of Audits Can I Expect?

There are three types of audits performed based on the size and complexity of a business and its operations.

• Physical—An auditor examines the financial records of the business.
• 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.

Record Keeping

An audit can be a simple process when thorough and accurate records are maintained. Records necessary for an audit include:

• Payroll journal and/or individual payroll records
• General ledger
• Check register or cash disbursement journal
• Quarterly state and federal tax returns
• Sales & receipt journals
• Certificates of Workers’ Compensation & Liability insurance for sub-contractors.

Examination of records is a necessary part of determining fair and accurate premiums. Through cooperation, an audit can be conducted quickly with minimal disruption.

We want to ensure your premiums are both fair and accurate. Our audit process does just that. See the attached guide for further detail.