Financial Services
Insurance Agency
The insurance industry has specialized accounting for both underwriters and agencies. For agencies, the accounting depends on several factors, depending on the two major factors:
Agency Type
Method of Billing/ Payment
Agency Type
01
Wholesale
Clients are
retail agencies.
02
Retail
Clients are
insured parties.
03
MGA
The agency has the
authority to bind
policies on behalf
of an underwriter
Methods of Payment/Billing
AGENCY BILL
Upon Receipt of Insurance Binder
The agency bills the insured for the premium, taxes, and fees, and remits the premium taxes and fees less the commission to the carrier.
AGENCY BILL
Upon Insured’s
Premium
Payment
Payment of Premium Bill
DIRECT BILL
Upon Receipt
of Insurance
Binder
The underwriter bills the insured directly, and the agency has a receivable for the commission from the carrier.
Collection of Premium Bill
DIRECT BILL
Upon Agency
Receipt of
Commission
Typically, carriers will provide formatted statements of payments made to the agency on direct bills. This can be uploaded for the automatic creation of cash receipts from the Carrier, along with the automatic application of that cash receipts to the agency billing of the carrier. This provides an inherent reconciliation of direct pay policy commission receipts with what is due under the policy
Ayodia Insurance Work
Implementation and customization of Accounting Seed to provide a comprehensive financial automation solution for numerous agencies, including:
Automatic accounting entries for policies that are either agency bill or direct bill, with all billings, payables, revenue, and commission expense billed in the correct amounts to the correct parties
Reversal of Accounting button on Policy so that if there is an error on the policy input, the accounting can be reversed and then recreated after a policy correction.
Automatic calculation of refunds due to insured parties, or retail brokers (in the case of a wholesale brokerage), for policy terminations.
Automatic creation of billing and payable records for policy cancellations and for endorsements.
Accruals for producer commissions, which become payable to the producer upon collection of the agency commission.
Comprehensive reporting on policies, including renewal rates.
Automatic creation of cash receipts/disbursements from direct bill carrier uploads, which match the cash receipt to the carrier billing, and apply it.
Creation of financial automation for wholesale and MGA agencies.
Separate, appropriate accounting for agency and carrier fees.
Provision for either agency pays taxes or carriers pays taxes.