Which task best describes a premium auditor’s primary role?

• A. Negotiate settlements
• B. Determine actual exposure and premium by examining policyholder operations, records, and accounting
• C. Handle first notice of loss
• D. File claims

Answer: (B)

The main concept is that premium auditors verify the actual exposure behind the policy to set the correct premium. They review the policyholder’s operations, financial records, payroll, sales, and accounting data to determine exposure bases and classifications, then calculate the final premium accordingly. This post-term audit ensures the premium reflects what the insured actually experienced, correcting any estimates made at inception.

This role is distinct from handling losses or claims. Negotiate settlements, first notice of loss, and filing claims are all claims-related activities, not the pricing review performed by a premium auditor. For example, after the policy period, the auditor will look at payroll records and other financial data to determine whether the initially charged premium accurately matches the insured’s true exposure, adjusting the premium up or down as needed.