Glossary
Audit Premium
An adjustment to premium determined after the policy period, once the insurer measures the insured's actual exposure against the estimate used at inception.
Commercial policies rated on payroll, sales, or receipts are written on estimated figures and audited afterwards. If the real numbers came in higher, the insured owes additional premium; if lower, they get a return premium. Workers' compensation and general liability are the usual candidates.
Audit premium is one of the largest sources of surprise commission activity. It can land months after a policy expires, on a statement covering a period the agency has already closed, and it can be either positive or negative. Reconciliation has to be able to tie a stray adjustment back to a policy term that is no longer current.
See also
- Return Premium — Premium refunded to an insured when a policy is cancelled mid-term or an endorsement reduces the exposure.
- Endorsement — A document that amends an in-force policy — changing coverage, limits, insured property, or named parties — usually with…
- Commission Statement — A document from a carrier showing the commissions earned by an agency on policies sold, including premium amounts, commi…