No, not that kind of audit. Let’s leave the IRS out of this.
An audit is done to determine your actual insurance exposure and to obtain insurance rating information only. This common process is intended to make sure you’ve paid no more and no less than the appropriate premium for your exposure.
This “premium” audit evaluates the estimated premium you paid at the inception of your policy. The insurer will look at your books to determine actual payroll, sales, or units sold and compare them to those estimates. Higher means you might owe a little more. Lower, and you get some money for your pocket.
Types of Insurance Companies
You own a company that performs glass blowing while on a tightrope over a large crowd of people, and you wonder why licensed insurance companies don’t want to do business with you? This is where surplus lines companies typically come in.
Let’s break this down a little further
Licensed (Admitted) Insurers
The Texas Department of Insurance (TDI) regulates the policy forms and rates of Licensed Insurers, so policies offered by these companies must contain certain legislatively mandated provisions. Examples of licensed insurers in Texas are the names you’re familiar with: Travelers, The Hartford, and Kemper.
The more risky the business, the less it fits neatly into what the licensed insurance companies will write. We approach licensed companies first. If they decline to quote your coverage, then we will approach the surplus lines companies.
Surplus (Non-Admitted) Lines Insurers
Insurance not available through licensed insurers may be placed with eligible surplus lines insurers. To be eligible to write surplus lines coverage in Texas, the insurer must meet certain requirements and be on TDI’s eligible list.
What makes them different? Texas laws regarding notice of cancellation and nonrenewal do not apply to surplus lines insurers, and it is common for them to retain a significant portion of the premium in the event the insured cancels the policy midterm. If a surplus lines insurer becomes insolvent, its policyholders are not protected by the Texas Property and Casualty Insurance Guaranty Association.
New Business – Where Do I Start?
As insurance professionals, we know insurance. On the other hand, we are not experts in human resources, website design, or accounting. So when we start a partnership with a new client, we take the time to gather information on aspects of their business that are not our specialty. Then we design a custom risk management package that will cover every eventuality for your business.
We worry about the details so you don’t have to.
Now pat yourself on the back for making such a great decision, and start gathering the following items before you meet with an agent or broker
- Financial records showing assets and liabilities.
- Addresses of all locations of your business
- Copies of leases or contracts you use
- Square footage and type of space you are renting
- Name and address of landlord(s)
- Name and addresses of any locations where your employees or contractors will work
- Do you have a business vehicle or trailer? If so, we need year, make, model, and driver information including drivers license, social security, and date of birth.
- How many employees do you have? What are their job titles?
- Officer, director, and owner’s information, including name, address, birthdate, social security number, and percent of ownership. Also, do any of them own any other businesses?