What does a premium audit assess?

A premium audit primarily involves a comprehensive examination of the policyholder's reported income and exposures to ensure that the premiums being charged reflect the actual risk and exposure levels of the insured. This process allows insurance companies to confirm that they have calculated premiums accurately based on the most current financial data and operational details provided by the insured.

The audit typically reviews various factors, such as payroll, sales revenue, and other operational metrics relevant to the coverage being provided. This ensures that the premium aligns with the level of risk associated with the insured entity, allowing adjustments to be made if discrepancies are found. An accurate premium audit is crucial because it helps maintain fairness between insurers and policyholders and ensures that the premiums charged are neither too high nor too low based on the actual exposures.

In contrast, other options focus on different aspects of insurance or financial assessments which do not specifically relate to the primary function of a premium audit.