General Ledger Accounting for P/C Agencies

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Excellent article explaining the problems that insurance agencies are facing with regard to their Premium Trust Accounting. I have worked for over 38 years in eight agencies utilizing six specialized Insurance Agency accounting systems. With each agency, there were years of accumulated accounting errors to address, as well as a lack of easy balancing tools is some systems..

Many agents believe that their accounting system will maintain proper control of their accounting because their Financials are always “in balance”, and it will, if their accounting people have an understanding of how their system functions, and they maintain the proper control of it. Many agencies believe that ANY bookkeeper can handle their accounting, and unfortunately, there is no one to properly train them in Insurance accounting, or knowledgeable Management oversight. If a novice inherits an out of control situation, they will not have the understanding or experience to clean up the past, or the ability to properly handle the many different types of transactions in the future.

With Applied’s TAM system, there is a reliable Premium Trust Reconciliation report which shows how much you should have in your Trust Bank accounts to cover liabilities to your Markets and your Insureds*. However, IF your Open Company Payables don’t agree with your Balance Sheet payable details, NONE of your Financial reports can be relied upon. If they do, you can easily determine how much you should have in your Trust, and know exactly how much earned commissions you have to cover any advances*, as well as how much money your have available for continuing operations.

Balancing is not the only problem. You still must review your Open Payables to make sure that you haven’t refunded credits that you haven’t received (or received but recorded as income), collected money for insurance that may not have been bound, or cancelled in error.

Without proper balancing, many errors can, and do occur, unfortunately, sometimes with mal intent.

*Some states require extra funds in trust to cover advances. This amount CAN be determined by analyzing the data in the Trust Reconciliation Report, but could easily be determined if the report were available by insured.