Premium audit policy transaction

In the base configuration, PolicyCenter provides two types of premium audits: final audit and premium report policy transactions. You can configure these audit types to meet your requirements or add new configurable audit types. For information about configuration, see Configuring premium audit.

A final audit policy transaction covers the entire policy term. Only one final audit applies for each policy term. The final audit begins on the policy effective date and ends on the policy expiration or cancellation date. Premium report policy transactions, on the other hand, are a series of non-overlapping periodic audits that are scheduled and billed within the coverage period. They are also know as interim reports. For example, you can choose to schedule premium reports by calendar months. Then a separate audit is conducted for each calendar month of the policy term.

A final audit contains the verified and ultimate cost for a variable basis policy. When the policy is issued, the estimated annual premium (EAP) is based on the policyholder’s best guess at the basis, such as payroll, for the entire policy year. The final audit is conducted at expiration or cancellation. A premium auditor reviews the policyholder’s records, or the policyholder officially reports the actual payroll amounts for the past policy term. The cost of the policy is recalculated using this actual basis amount, and the policyholder is billed or returned the difference.

With premium report policy transactions, the policyholder is billed for premium based on periodic requests for actual basis amounts, such as payroll. A deposit, usually a percentage of the EAP, is billed at the beginning of the policy. As each reporting period ends, the policyholder is billed based on the actual basis reported by them. Take a policy which runs from January 1 of this year to January 1 of the following year with monthly premium reporting. The policyholder will be billed a deposit and up to 12 monthly reports will be scheduled. At the end of January, PolicyCenter initiates the first monthly report which covers the month of January. By mid-February, the policyholder sends back the basis detail. The application calculates the premium for the month of January and bills the insured. These reports continue on a specified schedule until the policy ends. A final audit is also conducted. The final audit verifies and adjusts the premium for the entire policy term. It also prompts the return of the initial deposit.

In PolicyCenter, final audit policy transactions are available for both workers’ compensation and general liability lines of business. Premium report policy transactions are available for the workers’ compensation line of business only.