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🔍 '''Claims auditing''' is the structured review of [[Definition:Insurance claim | claims]] files, processes, and payments conducted to verify that an [[Definition:Insurance carrier | insurer]], [[Definition:Third-party administrator (TPA) | TPA]], or [[Definition:Managing general agent (MGA) | MGA]] is handling claims in accordance with [[Definition:Policy terms and conditions | policy terms]], [[Definition:Claims guidelines | claims guidelines]], [[Definition:Insurance regulation | regulatory requirements]], and agreed-upon service standards. Whether performed by internal audit teams, carrier oversight units, or independent audit firms, the discipline serves as a critical quality-control mechanism in an industry where even small per-claim errors can compound into significant financial and [[Definition:Regulatory compliance | compliance]] exposure over large portfolios.

⚙️ A typical claims audit involves selecting a sample of closed and open files — stratified by [[Definition:Line of business | line of business]], claim size, or adjuster — and evaluating them against predefined benchmarks. Auditors examine whether [[Definition:Coverage determination | coverage determinations]] were correct, [[Definition:Reserve | reserves]] were set and adjusted appropriately, [[Definition:Loss adjustment expense (LAE) | expenses]] were reasonable, [[Definition:Subrogation | subrogation]] opportunities were pursued, and payments aligned with documented evaluations. In [[Definition:Delegated underwriting authority (DUA) | delegated authority]] arrangements, the carrier often audits the [[Definition:Coverholder | coverholder's]] or TPA's claims handling as part of its oversight obligations under the [[Definition:Binding authority agreement | binding authority agreement]]. Findings are categorized by severity — from minor documentation gaps to material overpayments or [[Definition:Bad faith | bad faith]] risks — and tracked through corrective action plans.

📈 Regular claims auditing protects both the insurer's balance sheet and the policyholder's interests. It exposes [[Definition:Claims leakage | claims leakage]], uncovers patterns that may indicate [[Definition:Insurance fraud | fraud]] or adjuster error, and ensures the organization is meeting its contractual and regulatory obligations. For carriers that delegate claims handling to third parties, audits also serve as the primary mechanism for maintaining accountability — without them, the insurer has limited visibility into whether its [[Definition:Claims authority | claims authority]] is being exercised responsibly. Beyond individual findings, aggregate audit results often inform broader operational improvements, from adjuster training programs to system enhancements, making claims auditing not just a compliance exercise but a driver of continuous performance improvement.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Claims leakage]]
* [[Definition:Claims administration]]
* [[Definition:Claims guidelines]]
* [[Definition:Delegated underwriting authority (DUA)]]
* [[Definition:Subrogation]]
* [[Definition:Loss adjustment expense (LAE)]]
{{Div col end}}

Definition:Claims auditing - Revision history

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