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Before buying any insurance policy, one needs to check everything regarding the premium amount, extent of coverage and terms and conditions. Auditing the insurance is important to analyze and scrutinize the various parts of an insurance claim. These include analyzing the insurance documents, its financial statements, risk evaluation, assessment of the liabilities etc. This article gives an overview of the general liability insurance audit.
As the name suggests, an insurance audit is the assessment and evaluation of financial statements and liabilities of the insurance companies. It’s the proper examination of everything related to the insurance claim, like risk and liabilities evaluation, liability procedures etc.
While on the other hand, a general liability insurance audit is the audit of business payroll, expenses and risks exposure associated with it. It is usually done by a professional auditor. Evaluation of the financial statements and payroll records of the policyholder is necessary to determine that the policy represents the accurate rating of the company’s exposure to liability.
Auditing general liability insurance is necessary to determine the right insurance policy which is needed for your business according to the vision and customized needs of your business. It also helps in determining the appropriate coverage amount according to the type and size of your business because every business has different needs.
This audit also tells where there’s a need to adjust the premium amount or if the policy requires deductibles or out-of-pocket expenses.
As discussed above, the main purpose of auditing general liability insurance is the evaluation and assessment of the risks associated with insurance policy claims. But initially, it is a very tough and arduous task to determine the accurate payroll and revenue during the start of a premium year; that’s why an audit sometimes takes time during the start. For conducting this audit, the auditor will first look at the payroll and financial statements of the company of previous financial years, and he will take into account the number of employees a company has fired or hired in the organization during the previous financial years.
One thing important to keep in mind is that not every liability insurance policy can be audited. Audits are generally conducted on general liability, liquor liability and on workers’ compensation policies. Types of policies which can be audited do not depend on a single factor. There are multiple factors which determine whether an insurance policy can be audited or not. These factors include but are not limited to how old a company or an organization is, the type of the company, whether a company or an organization is conducting a business that operates in high-risk industries etc. These are some of the factors that define whether a particular insurance policy can be audited or not.
General liability insurance audit can be done in many types or via several pathways. These are discussed below:-
Following is the ways in which auditors and organizations can prepare before doing or conducting a general liability insurance audit. These are mentioned below:-
The process for conducting this type of audit is not that arduous or complicated. Given below is the process in brief:-
There are several benefits of the general liability insurance audit. These are given below:-
This article talks about general liability insurance audits. It also talks about how a company can successfully conduct an audit and what’s the purpose and needs behind conducting such type of audit. Finally, we can conclude that before conducting the insurance audit, preparation is really crucial to avoid any mistakes.
Read Our Article: Procedure for Registration of Indian Insurance Companies under IRDAI Regulations
Seep is a lawyer by profession. She has done BA LLB and now shifted to full-time legal writing. She has extensive prior experience of freelance content writing and has worked for both Indian and international clients. She is vehemently curious and overtly passionate about so many things like blogging, reading, writing and travelling. She always wanted to explore the domains of the unconventional field of law. She has extensive experience in the area of corporate law and in drafting both Indian and International agreements as well. Her driving force is versatility and flexibility. She doesn’t restrict herself only to the field of law.
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