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Veluru Harish, Pooja K C, Ankush Raj, Hanisha V Lokhande

An essential step in the insurance process is the premium audit which confirms that the insured has paid the appropriate premium based on their real exposure to risk during the policy duration. The insurance company or a third-party auditor performs the audit, normally done at the conclusion of the policy period. To verify the correctness of the information provided to compute the premium, the auditor will examine the insured’s financial records, employment records, and other pertinent documents during the premium audit. This includes sales and payroll records and any pertinent information influencing the calculation of premiums.

To appropriately reflect the insured’s risk exposure during the policy period, the premium must be adjusted because of the premium audit. The insured may be obliged to pay an additional premium to the insurance provider if the audit indicates that they underpaid their premium. On the other hand, the insured can be qualified for reimbursement from the insurance provider if the audit reveals that they overpaid their payment. This apart, to guarantee that the premium audit appropriately reflects the insured’s risk exposure, it is critical for insureds to furnish the insurance company with accurate and comprehensive information throughout the policy period. In the event of a loss, failing to do so could lead to a higher premium or the denial of a claim.

“The U.S. Bureau of Labor Statistics reports that despite the changes the pandemic brought, the labor force will continue to age, with workers over the age of 55 increasing from 21.7% in 2014 to nearly 25% by 2024. Although older workers tend to file fewer workers’ compensation claims, when they do file them, the costs tend to be higher due to the severity of the injury.”

The general liability insurance market is experiencing substantial growth as more individuals and businesses understand the importance of safeguarding their assets and livelihoods. According to the report published by Acumen Research and Consulting titled “Liability Insurance Market Forecast, 2022 – 2030”, the Global Liability Insurance market size in 2021 stood at USD 251,700 Million and is set to reach USD 418,800 Million by 2030, growing at CAGR of 5.9%.

There are policies where premium calculations are based on variable factors: worker’s compensation and general liability insurance. There are challenges in handling large complex data sets, changing regulations, integration, and validation with legacy systems, and fraud detection. However, technology gives service providers opportunities to revolutionize the Premium Audit Process. Here are a few emerging technologies that are game changers for the insurance premium audit landscape:

• Automation: One of the most significant opportunities for IT in the premium audit process is automation. IT professionals can leverage advanced technologies such as artificial intelligence (AI) and machine learning (ML) to automate the audit process. This can significantly reduce the time and effort required for manual audits, while also improving the accuracy and quality of the audits. Automation can also help reduce human error and ensure a more consistent application of audit standards. RPA automation in insurance claims can execute the process 70 – 80 % faster than human processing.
• Data Analytics: IT Service providers can leverage data analytics to improve the accuracy of premium audits. As the amount of data businesses generate continues to grow, data analytics can help insurance companies identify patterns and trends that can improve the accuracy of premium audits. This can lead to a more accurate assessment of risks and ultimately result in more appropriate premiums. Analytics can also identify patterns of claims that may indicate issues with risk management practices, allowing the insurance company to provide guidance on best practices to mitigate risks.
• Mobile Applications: The use of mobile applications can simplify the process of collecting and submitting data for audits. Service providers can develop user-friendly mobile applications that policyholders can use to upload and share financial records and other data. This can save time and improve the accuracy of the audit process. Mobile applications can also allow policyholders to access real-time updates on their policy status, enabling them to make more informed decisions about risk management practices.
• Cloud Computing: Cloud computing offers insurance companies the ability to store and process vast amounts of data, reducing the need for expensive hardware and software. Service providers can develop cloud-based solutions that enable faster and more efficient audits, regardless of the policyholder’s location. Cloud-based solutions can also provide greater security, allowing automatic backups and disaster recovery options.
• IoT: IoT can help workers’ compensation insurance transform from review and reimbursement to predicting and preventing. IoT devices can be used to track the health and safety of workers, detect and report when safety equipment is damaged, track speed, location, and other safety-related data, and monitor environmental conditions to help employers identify potential risks and take action to minimize or eliminate them.
• Cybersecurity: As insurance companies collect sensitive data from policyholders, cybersecurity is paramount. The IT sector is well-positioned to develop robust cybersecurity solutions that protect sensitive data from cyber threats like hacking and data breaches. This can help insurance companies build trust with their policyholders and improve the security of the premium audit process.

In conclusion, the opportunity for the IT service provider to revolutionize the general liabilities and workers’ compensation premium audit process is immense. By leveraging advanced technologies such as automation, data analytics, mobile applications, cloud computing, and cybersecurity, insurance companies can reduce manual effort by up to 80 %; increase audit output by more than 200 %, increase 4 times in the number of audits per day, and can result into 80- 90 % decrease in the time of audit intake.

References:

• Workers’ Compensation Insurance Industry Outlook | AmTrust Insurance (amtrustfinancial.com)
• https://www.globenewswire.com/news-release/2023/02/13/2607186/0/en/Liability-Insurance-Market-Size-Growing-at-5-9-CAGR-Set-to-Reach-USD-418-8-Billion-By-2030.html
• https://www.exlservice.com/industries/insurance/premium-audit
• https://associationdatabase.com/aws/NSIPA/asset_manager/get_file/27056?ver=61

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