Choosing a Fair Sample of Claim Applications
How we agree sample size and selection rules before a financial audit of insurance claims applications begins.
A financial audit of insurance claims applications is only as useful as the sample behind it. Auditing three friendly files tells a claims manager little; auditing every file in a ten-thousand-file book is rarely necessary.
Start from the decision
If the decision is “can we settle this large-loss application?”, the sample may be a single pack examined in depth. If the decision is “are our motor handlers applying deductions consistently?”, we need a stratified sample across handlers and months.
Stratify by severity and age
We usually split open and closed files, then band by reserve or paid amount. Older open files often hide the reserve drift discussed in our reserve notes article.
Agree exclusions in writing
Files in active litigation or external mediation may be excluded from the sample so the audit does not collide with counsel’s strategy. Those exclusions belong in the engagement note.
Keep a spare list
When packs arrive incomplete, we pull replacements from a pre-agreed spare list rather than shrinking the sample silently. That habit keeps the findings statistically honest for internal audit sponsors.