Insurance Audits. Friend or Foe?

Audits seem scary, but they can help businesses.

The word "audit" is a small word that creates big feelings in people. Often, it conjures images of wrongdoing, and consequences. However, what if those consequences were actually helpful? Let's explore the benefits of audits, and how they help Commercial Insurance policy holders.

Audits are extremely common in the insurance & business world. Designed to be helpful, they ensure business owners protect themselves and their businesses. They also encourage communication between policy holders and Commercial Insurance Agents.

In the insurance world, audits are most often focused on businesses. Not all businesses receive an annual audit, but many do. That may seem excessive, but we’ll delve into the “why” behind these audits, later in this post. To begin, let's start with the question - “what is an audit”?

What is an audit?

An audit of your insurance policy is a standard review process that looks at your business operations, as a whole. Insurance audits for commercial policies review payroll, sales, subcontractor expenses, and much more.

Businesses facing rapid growth need as much information as possible to plan for their futures. Premium audits can highlight some of these areas for business owners, helping them adapt to meet customer demands.

Benefits of an audit

When most business owners wake up in the morning, they aren’t thinking of calling their insurance Agent. They definitely aren't maintaining a running list of the potential risks facing their business. Often, business owners aren’t even aware of the benefits and coverages that could protect them.

A Commercial Insurance Agent knows that there are ever-changing challenges that face businesses. More importantly, Agents also know how to protect businesses. Part of that information comes from conducting a premium audit for a business. It helps Agents get business owners the coverage they need, and get the most out of the coverage the business has.

When an audit happens, it can reveal many different things about a business. It could reveal the business spent more money on payroll this last year than last. It can highlight gaps in coverage. Premium audits review many facets of a business, and opportunities for business owners to use that information in their operations are endless.

An audit can reveal cost saving opportunities for a business, too. Premium audits can reveal if a company is paying too much for its coverage. If this happens, future payments may be eligible for adjustments.

In some instances, an audit can highlight that a business may be under-insured. This may mean an increase in premium. However, an increase in coverage and premium now can save businesses from unexpected costs, in the future.

Subcontractors and audits

Subcontractors, in many lines of business, help complete projects and move businesses forward. However, hiring subcontractors to help improve a business can open it up to additional risks and exposures.

The questions that audits ask about subcontractors help fine-tune the business coverage needed. Questions like: "Is the subcontractor insured?" and "Does your business have all the correct paperwork from the subcontractor?"

Those answers help Agents best protect a business. Does their plan have coverage for issues on a job site? Is their Workers' Compensation plan the right one for them? Agents are here to help customers protect their businesses, but to do that, they need the information an audit provides.

What is the audit process?

An audit can occur in a couple of different ways, and each carrier selects how they will conduct the review. The options available are self-audit or physical audit, with Hastings Insurance. Each option has its own benefits, but the different options make the process convenient for the individual business owner.

After an audit, the results undergo extensive review. From there, the premium may be adjusted, coverages adjusted, and a business can plan for the next year.

Summary

Overall, the structure of a premium audit helps ensure the most accurate coverage for a business owner. Audits help plan for the business's future and getting the right coverage now. Knowing the risks facing a business, payroll, sales, and subcontractor information helps Commercial Insurance policies best protect the future.

Interested in learning more? Check out Hastings Insurance's resources for audits, here.