Checking the Premium

• The premium collected amounts are credited to a different bank account. There are normally no withdrawals allowed from that account for general spending purposes.
• The premium collected amounts are credited to a different bank account. There are normally no withdrawals allowed from that account for general spending purposes.
• The collections are sent to the Regional Office or Head office in accordance with the insurance company's policy.
• The Insurance Act of 1938's Section 64VB states that the insurer may not take on any risk without first receiving premium.
• Because insurance premiums are paid when policies are issued, it is crucial for an auditor to confirm them.
• It is observed as a consideration for taking on the insurance company's risk.

The auditor must follow the following guidelines-

• The auditor must first review the internal controls and compliance that are required for the collecting and recording of premiums before beginning the premium income verification process.
• The cover notes must be numbered in serial order
• The auditor must verify that the premium records are kept in chronological order and include all information, including GST charged daily in accordance with the acceptance advise.
• The auditor must confirm that the premium amount calculated matches the amounts displayed in the general ledger.
• Additionally, the auditor will confirm whether or not the payments that are expected on or before the balance sheet date have been received and have been recorded as premium revenue for the audited year.

Claim Verification

Every division’s or branch’s auditor is required to gather data for all business classes and will choose how many documents in total need to be examined, giving more weight to claims with greater values. All payments, including those for the repairs, the survey, the photographs, etc., are deducted from the claim account. The auditor must-

• Inspect the clause for unresolved claims.
• Verify whether there is a provision for claims for which the corporation is held legally liable.
• Verify that the provision provided does not exceed the insured amount.
• Verify the co-insurance agreements; the business has made provisions for its own portion of the expected liabilities.

Commission Verification

A commission is used to fund an agent's compensation. The amount of compensation is determined by adding a percentage to the premium the agent has collected. The commission for the business procured is paid to the agents, and the commission on direct business account is subsequently debited. In most cases, insurance agents approach potential customers. The auditor must confirm-

• Entries made in the disbursement vouchers with relation to the copies of commission bills and statements.
• Verify that the officers-in-charge have approved the vouchers in accordance with the rules and that income tax has been withheld at the source.
• Verify the permitted commission rate.
• Verify the commission accounting period.

Confirmation of operating costs

The auditor needs to examine the following operational costs-

• The highest of Rs. 5 lakhs in expenses or 1% of the net premium. It needs to be displayed separately.
• The costs incurred in the investment department, bank fees, etc., are examples of expenses that must be listed separately because they are not direct expenses considering insurance businesses.