Insurance audit programs are a combination of software, checklist, forms and compliance manuals which examines the operations of insurance and financial instruments based on regulations created and provided by the National Association of Insurance Commissioners (NAIC). Most insurance audit programs consist of at least four basic items used when performing a comprehensive audit.
Data Collection Checklist
A data collection checklist provides the auditor with a list of items needed to start an insurance policy review or audit examination. Items which are on the data collection checklist are usually client questionnaires, insurance policy, company prospectus and, financial records with detail annual accounting statements. Important letters and documents explaining other insurance matters such as payouts, savings programs, stocks, bonds or investment programs can be included on the checklist.
A policy analysis audit reveals if an existing insurance policy was the right choice for an organization or individual. The analysis test several areas of the policy such as the cost difference between prior and future premiums, death benefits and effects and various policy costs compared with other insurance carriers. Policy analysis also examines the investment performance of insurance portfolios in the business industry. This analysis is performed by using software and documented policies created by the NAIC.
Company Evaluation Audit
Company evaluation audit examines the stability of an insurance company. It examines company investments or holdings obtained by an insurance company. Claims systems are also examined to determine if an insurance company can pay future claims to policy holders. During company evaluation audits, other methods are used to gauge company performance. Most auditors use procedures created by the Moody’s Standard and Poor insurance compliance manual which provides industry ratings which an auditor can use to effectively evaluate company or organizational portfolios.
Policy Tax Audit
A policy tax audit is designed to review the tax structure of the policy to see if the insurance policy holder is in compliance with local, state and federal tax laws. A faulty insurance policy can result violation of certain laws and the policy owner paying a fine or extra taxes. The tax audit also reveals if an individual is paying high insurance premiums for a house, car, boat or real estate. The policy tax audit is designed to find solutions to lower taxes implement the policy for tax advantages.