Final audit overview

Note: In the base application, the workers’ compensation and general liability lines of business are set as auditable.

Some lines of business will require final audit; other lines may offer an optional audit. When the final audit is optional, the underwriter can set the Requires Final Audit field on the Payment page to Yes, No, or Determined By Business Rules.

Various criteria determine whether a final audit is required, the audit method, and the audit assignment. These criteria vary by insurer. Among other things, the criteria may include the type of exposures that the policy contains, the premium size of the policy, the jurisdiction of the policy coverage.

Audit schedules

Audit schedules offer the user choices about the audits to be scheduled. For example, final audit schedules determine the audit method, the process start date, and the due date, of the audit method.

Process start date

An expiration final audit ends on the normal expiration date of the policy. The audit schedule for an expiration final audit which will be completed by a physical audit may be set to start 30 days prior to the policy expiration.

A cancellation final audit ends on the policy cancellation date. The audit schedule, which will be completed by a physical audit, may be set to start as soon as the policy is canceled.

On the process start date, the Audit Task batch process starts the audit policy transaction. The status of the audit changes from scheduled to in progress, and you can begin collecting the audit information. After the information is received and entered, the rating engine uses these actual values to calculate the premiums for the prior policy term. PolicyCenter adjusts the amount billed for the policy. Final audits are always completed after the policy term ends through expiration or cancellation. For expiration final audits, the audit process starts shortly before the renewal policy term begins and the prior policy term concludes.

Note: Since a final audit policy transaction changes the billing, but not the policy contract, the audit policy transaction is not bound but is considered complete.

If the final audit is scheduled, but it is later determined that it is not required, it may be waived. If a final audit is completed and then the audited values need to be adjusted, the final audit may be revised. When policy changes are made after a final audit has been completed, PolicyCenter reverses the final audit. PolicyCenter schedules a new audit based on the changed policy so that the policy changes may be incorporated into the new audit.

Due date examples

It is likely that a physical audit will take a longer time to complete than a phone audit. Therefore, the physical audit schedule may set the due date to 45 days from the period end date. The phone audit may set the due date to only 15 days from the period end date.

Audit method examples

The default application provides the following audit methods:

Physical – A representative (such as a premium auditor) makes an in person visit to the policyholder to review the business records and verify and obtain required audit information.
Phone – The premium auditor contacts the policyholder by phone to obtain all audit information.
Estimated – This method is used only when the other methods are not available. For example, the policyholder went out of business, and the records were lost.
Voluntary – The insurer sends a document to the policyholder requesting the required information. The policyholder adds the information and returns the document to the insurer for processing. This document contains instructions for the policy holder to provide actual exposures for the reporting period. Generally, this includes class codes and other rating information.