Risk Control and Premium Auditing

Question 1

Premium audit

Answer 1

Methodical examination of a policyholder’s operations, records, and books of account to determine the actual exposure units and premium for insurance coverages already provided

Question 2

Exposure unit (unit of exposure)

Answer 2

The unit of measure (for example, area, gross receipts, payroll) used to determine and insurance policy premium

Question 3

Loss costs

Answer 3

The portion of the rate that covers projected claim payments and loss adjusting expenses

Question 4

Test audit

Answer 4

An audit conducted by an insurance advisory organization or bureau to check the accuracy of insurers’ premium audits

Question 5

Premium pay (shift differential)

Answer 5

A payroll system that increases the regular hourly wage rate for the night shift or other special conditions

Question 6

Deposit premium

Answer 6

The amount the primary insurer pays the reinsurer pending the determination of the actual reinsurance premium owed

Question 7

Experience modification

Answer 7

A rate multiplier derived from the experience rating computation