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🔍 '''Claims audit''' is a systematic review of an [[Definition:Insurance carrier | insurer's]] or [[Definition:Third-party administrator (TPA) | third-party administrator's]] claims-handling files, processes, and outcomes to assess compliance with internal guidelines, [[Definition:Insurance regulation | regulatory requirements]], contractual obligations, and industry best practices. Audits may be conducted by an insurer's own internal team, by external auditing firms, or — in the context of [[Definition:Delegated underwriting authority (DUA) | delegated authority]] arrangements — by a [[Definition:Managing general agent (MGA) | managing general agent]] or carrier reviewing the claims performance of a [[Definition:Coverholder | coverholder]] or TPA.

📂 A typical audit involves sampling a representative cross-section of claim files and evaluating them against defined criteria: timeliness of acknowledgment and investigation, accuracy of [[Definition:Loss reserving | reserve]] setting, appropriateness of settlement amounts, adherence to [[Definition:Claims cooperation clause | cooperation clause]] requirements, proper documentation, and regulatory compliance such as timely issuance of [[Definition:Claims denial | denial letters]]. Auditors may also review aggregate metrics — [[Definition:Claims cycle time | cycle times]], [[Definition:Litigation management | litigation rates]], [[Definition:Subrogation | subrogation]] recovery ratios — to identify patterns that individual file reviews might miss. In [[Definition:Reinsurance | reinsurance]] relationships, the [[Definition:Reinsurer | reinsurer]] often retains contractual audit rights to verify that the [[Definition:Cedent | ceding company]] is handling claims within the terms of the [[Definition:Reinsurance treaty | treaty]].

💡 Regular claims audits are among the most effective levers an organization has for controlling [[Definition:Claims cost | claims costs]] and managing operational risk. They surface problems early — an adjuster consistently under-reserving [[Definition:Bodily injury | bodily injury]] claims, a TPA missing statutory deadlines, or a pattern of settlements that suggests inadequate investigation. Findings from audits drive corrective actions, training programs, and sometimes renegotiation of delegated authority agreements. For [[Definition:Lloyd's of London | Lloyd's]] market participants, audit results feed into the oversight framework maintained by [[Definition:Lloyd's Market Association (LMA) | the Lloyd's Market Association]] and can influence a [[Definition:Lloyd's syndicate | syndicate's]] standing with the Corporation of Lloyd's.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Third-party administrator (TPA)]]
* [[Definition:Loss reserving]]
* [[Definition:Delegated underwriting authority (DUA)]]
* [[Definition:Market conduct examination]]
* [[Definition:Claims management]]
* [[Definition:Subrogation]]
{{Div col end}}

Definition:Claims audit - Revision history

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