CAS Practice Exam 2025 – Complete Study Guide

Premium audits play a vital role in risk control primarily by providing information about unsafe procedures or conditions. These audits involve a thorough examination of the insured’s operations, practices, and the accuracy of their reported exposures. During this process, auditors can identify any hazardous practices or conditions that could lead to increased losses or claims. This information is essential for insurers, as it enables them to develop strategies for risk mitigation and to advise the insured on necessary improvements. By highlighting these unsafe procedures or conditions, premium audits facilitate proactive measures to enhance safety and ultimately lower the likelihood of claims, which is a key aspect of effective risk management.

While other choices may seem relevant, they do not capture the primary function of premium audits in the context of risk control. For instance, the suggestion to visit every insured directly is impractical and not feasible in terms of efficient resource allocation. Eliminating the need for risk assessment overlooks the intrinsic value of audits as part of understanding and managing risk within an organization's operations. Lastly, while audits can lead to better risk profiles, they do not inherently increase insurance sales, which is a separate business goal. Therefore, the correct answer underscores the pivotal role that audits play in enhancing safety and controlling risk through informed insights.