What is the purpose of a "premium audit" in insurance?

The purpose of a premium audit in insurance is to ensure the correct premium was charged based on actual exposure. This process involves reviewing the policyholder's operations, payroll, sales, or other relevant financial data that relates to the risks covered by the insurance policy. The audit helps to accurately align the premium with the actual risk exposure faced by the policyholder throughout the coverage period.

By assessing the true nature of the business activities and related factors, insurers can adjust the premium if necessary, ensuring that the charges are fair and reflective of the actual risk. This is particularly important in industries where exposures can fluctuate significantly over time, as it prevents overcharging or undercharging policyholders.

The other choices pertain to functions outside the scope of a premium audit, such as providing legal advice, verifying claims, or assessing the insurer's financial stability, which are managed through separate processes and evaluations within the insurance framework.