CAS Practice Exam 2025 – Complete Study Guide

Premium auditing plays a crucial role in the underwriting process of an insurance organization. It involves the examination of the insured's records and operations to ensure that the premiums charged accurately reflect the risk exposure and coverage provided. This process is essential for maintaining the integrity of the underwriting function as it helps to identify and assess the actual risk of the insured entity, which can change over time as a business grows or shifts in operations.

Through premium auditing, insurers can adjust policy premiums to align with the actual exposure, ensuring that they are neither undercharging nor overcharging customers. This accuracy in pricing is vital for the profitability and sustainability of the insurance company. By contributing to accurate pricing and risk assessment, premium auditing aids underwriters in making informed decisions about policy issuance and renewal, ultimately impacting the organization's financial health.

In contrast, while premium auditing may touch upon other functions like claims management, customer service, and marketing, its primary contribution is most deeply rooted in the underwriting process, making it the correct choice in this context.