BY: SAMANTHA DEELORRIETA
Effective risk management is crucial for safeguarding an organization’s financial health and operational stability. Companies can protect their capital and earnings from unforeseen disruptions by identifying, assessing, and mitigating potential threats—from financial uncertainty and legal liabilities to accidents. A thorough insurance policy audit ensures that an organization’s historical liability coverage program is robust enough to respond to potential current or future risks. The historical insurance policy and program audit is a proactive approach to minimizing the impact of unexpected events.
Risk management is often handled by a dedicated department in larger corporations, while small businesses, non-profits, and religious organizations may address it sporadically, such as during board meetings.
While many organizations focus on future goals, effective risk management today also requires planning for past liabilities. This includes the potential for civil suits related to bodily injury, property damage, or exposure to harmful substances that may have occurred decades ago. In some cases, organizations may have incomplete insurance records, leaving them unaware of gaps in their historical coverage.
Enter the insurance policy audit.
What is an insurance policy audit, and how does it help manage risk?
“Insurance policy audit” can refer to several different things. A quick Google search populates results for the following types of policy audits:
- A risk professional, such as an insurance agent, may recommend conducting an insurance policy audit to determine whether the organization’s current insurance program provides adequate coverage for its current risks.
- Insurance companies commonly conduct insurance policy audits, also known as premium audits, to confirm an insured is paying the correct premiums for coverage provided.
In insurance archaeology, however, a historical insurance policy and/or program audit is conducted to unearth the long-forgotten policies that comprise an organization’s historic liability insurance coverage. These audits determine the terms of coverage the policies provide and identify which policy years are missing. Whether you’re working proactively, responding to a demand from an environmental agency, or addressing a lawsuit, once this information is uncovered, it can be used to defend against newly filed legal actions—such as those alleging damage or injury from events that occurred decades ago—involving your organization.
How is an audit performed?
The audit process typically begins with a review of an organization’s business records, including insurance policies, financial records, meeting minutes, and litigation files. This review
can be conducted in several ways, depending on the organization’s method of storing its old files and the number of files to review. PolicyFind’s skilled archaeologists can review records onsite at the organization or in their own offices by having them shipped to them. These records can also be analyzed virtually via digital means.
During the records review, the archaeologist will note significant findings and sort out all records pertaining to insurance. This includes actual insurance policies and all documents that may provide “leads” to evidence of historic insurance coverage.
Once the pertinent records have been identified, the archaeologist will comb through them with a sharp eye to identify key information, such as policy numbers, carriers, limits, coverage types, agents, brokers, and more.
After all relevant information is compiled, it is organized into a report containing a Schedule of Insurance, Coverage Chart, and Recommended Next Steps. The report includes an overview of the archaeologist’s findings, the identified coverages (including carriers, limits, and layers), any gaps in coverage, and recommended next steps.
Contact PolicyFind
Knowledge of your company’s historic insurance coverages through an insurance policy audit will add valuable tools to your organization’s risk management arsenal. After the audit, whether there is a current action to respond to or further insurance archaeology to conduct, PolicyFind is here to help.
The best way to accurately assess whether an Insurance Policy Audit is the right option for your organization is to speak with us. During a free consultation, we will learn more about your specific situation and advise potential paths forward. Contact PolicyFind today to get the process started.