Every insurance organization works hard to manage risk, improve profitability, and drive growth. Premium leakage is a challenge that quietly undermines all three goals.
At Summit 2026, Dan Swensen, Senior Practice Director of Learning & Development at ReSource Pro, and Mike Warner, Vice President of Premium Audit at Builders Insurance Group, explored what they described as a “silent crisis” affecting insurers across the industry. The challenge goes beyond underwriting, claims, premium audit, or compliance. It exists throughout the insurance lifecycle, often hiding inside routine processes, communication gaps, and operational blind spots.
According to industry research discussed during the session, premium leakage can account for significant revenue loss across the industry each year, making it one of the most important, and least visible, operational challenges insurers face.
What is premium leakage?
Premium leakage occurs when an insurance carrier fails to collect the correct premium based on the actual exposure associated with a policy. It is often caused by organizational silos, incomplete information, and operational blind spots across underwriting, claims, and audit departments, rather than just intentional fraud.
As Warner explained, underwriting teams make informed decisions based on the information available to them at the time a policy is written. However, exposure can change, classifications may be inaccurate, information may be incomplete, or operational processes may fail to capture critical details. The result is unintended revenue loss.
While premium leakage is often associated with premium audits, the reality is that it originates much earlier in the insurance process and can emerge from multiple areas of the organization.
Leakage starts earlier than many realize
One of the session’s key takeaways was that premium leakage rarely stems from a single failure. More often, it develops through a series of small gaps that accumulate over time.
Underwriting was identified as one of the most common starting points.
Classification decisions, risk assumptions, and policy setup all rely on available information and human judgment. Even small discrepancies in class codes or business descriptions can significantly impact premium calculations over the life of a policy.
Construction risks provide a clear example. During the session, Warner discussed how certain class code combinations created opportunities for misclassification, resulting in lower premiums than intended. Through years of collaboration between underwriting and audit teams, Builders Insurance Group was able to reduce these occurrences and improve premium accuracy.
The lesson is simple: small details matter.
Fraud is only part of the story
When discussing leakage, many people immediately think about fraud.
Fraud certainly contributes to the problem. Organizations may encounter underreported payroll, uninsured operations, cash-paid employees, or other situations where exposure is concealed.
However, the presenters emphasized that not all leakage is intentional.
Many cases result from incomplete information, misunderstood requirements, reporting delays, or operational oversight. In some situations, insureds may not fully understand how their actions affect premium calculations. In others, critical details simply fail to make their way through the proper channels.
The distinction matters because solving leakage requires more than fraud detection. It requires operational visibility.
Why claims matter more than you think
Claims departments play a surprisingly important role in identifying premium leakage.
When claims are reported, adjusters often uncover information about job responsibilities, payroll practices, business operations, or workplace activities that were not previously visible. Those insights can reveal discrepancies between the exposure originally reported and the exposure actually present.
Claims also expose another challenge: delayed reporting.
When employers choose not to report incidents immediately, costs can increase significantly. Small injuries can become larger claims, creating unnecessary expenses and introducing additional complexity into the claims process.
The result is another form of leakage that impacts profitability.
The real problem: Organizational silos
Perhaps the most important message from the session was that premium leakage is not a departmental problem.
It’s an organizational problem.
Underwriting may identify one piece of information. Claims may uncover another. Audit may discover something entirely different years later.
If those insights remain trapped within departmental silos, opportunities to correct leakage are missed.
Warner highlighted the importance of cross-functional communication and shared accountability. At Builders Insurance Group, underwriting alerts help connect claims, underwriting, and audit teams so that important findings can be reviewed and addressed collectively.
Organizations that break down these silos create a stronger feedback loop, enabling teams to identify issues earlier and improve decision-making across the policy lifecycle.
Training is a competitive advantage
Another recurring theme throughout the discussion was the role of training.
Insurance is constantly evolving. Rules change. Regulations shift. Classifications evolve. New exposures emerge.
Without ongoing education, employees can unintentionally contribute to leakage through outdated assumptions or incomplete knowledge.
Effective training is not simply about providing answers. It is about helping employees understand why decisions matter and how those decisions impact the broader organization.
The more knowledgeable employees become, the more likely they are to identify issues before they become costly problems.
Technology and AI will help, but people still matter
As the conversation turned toward the future, the presenters discussed the growing role of AI in identifying risk classifications, uncovering hidden exposures, and improving operational visibility.
Examples already exist where AI tools can identify business activities and exposures that may otherwise go unnoticed, helping insurers make more informed underwriting decisions.
However, both presenters emphasized that technology should support, not replace, human expertise.
The combination of experienced professionals, strong operational processes, cross-functional collaboration, and emerging technology offers the greatest opportunity to reduce leakage and improve profitability.
From awareness to action
Premium leakage can feel like an uncomfortable topic because it forces organizations to acknowledge hidden inefficiencies.
But awareness is the first step toward improvement.
The insurers that successfully address leakage are the organizations willing to examine their operations, improve communication, invest in training, and continuously refine how they manage risk.
Because premium leakage is an audit issue and an operational excellence issue.
And the sooner organizations begin looking for the leaks, the sooner they can start closing them.
Interested in more insights from Summit 2026?
Explore additional session takeaways and join the conversation as we look ahead to our next Summit.
