Insurance broker bookkeeping: the document checklist

Insurance agencies run two revenue models side by side. Agency-billed policies mean the agency invoices the client, collects the full premium into a trust account, pays the carrier, and keeps the commission. Direct-billed policies mean the carrier bills the client directly and pays the agency commission afterwards, usually in lump sums covering many policies at once.

Both models produce cash in the bank. Only one of them is revenue. Sorting out which is which — often from a lump carrier payment with no policy-level detail — is the recurring work.

Request every month

Carrier statements are the documents most likely to be missing and most likely to be needed.

• Trust / premium account bank statements
• Operating account bank statements
• Carrier commission statements with policy-level detail — request the detail, not just the total
• Agency-billed invoices issued to clients, with premium and commission split
• Premium payments received from clients
• Payments remitted to carriers, matched to the policies they cover
• Direct-billed commission deposits, with the carrier statement that explains them
• Policy register or production report from the agency management system
• Broker fee invoices where charged separately from commission
• Credit card statements
• Producer commission payouts and any split arrangements
• Errors and omissions insurance statements

Request quarterly or annually

• Monthly or quarterly: trust account reconciliation proving the balance covers all premium held.
• Quarterly: carrier account reconciliations — what the carrier says is owed versus what the agency shows.
• Annually: contingency or profit-sharing commission statements from carriers.
• Annually: licensing and appointment renewals, E&O renewal.
• Annually: W-9s and 1099s for producers paid as contractors.

Ask before you onboard

These are the questions that decide whether you have priced the engagement correctly. Ask them on the first call, not in month three.

• Which policies are agency-billed and which are direct-billed?
• Is there a separate trust or premium account, and is it genuinely kept separate?
• Which agency management system, and does it hold policy-level commission data?
• How are commission transfers from trust to operating handled, and how often?
• Do producers earn splits, and are they employees or contractors?
• Do carriers provide policy-level detail with commission payments?
• Are broker fees charged separately from commission?
• Has the trust account ever been short?

Traps that catch bookkeepers new to insurance brokers

Trust deposits recorded as revenue. A premium collected into trust is a liability owed to the carrier. Only the commission retained is income. Getting this wrong inflates revenue enormously and is the first thing to check in an inherited file.

Lump commission deposits with no detail. A carrier deposit covering forty policies is nearly impossible to allocate without the statement. Make policy-level commission statements a standing monthly request — if the carrier will not provide them, agree a documented allocation method with the client.

Commission transfers with no trail. Agencies move commission from trust to operating in round numbers whenever cash is needed. Each transfer should tie to specific earned commission, or the trust reconciliation becomes impossible.

A spreadsheet doing the system's job. If the agency management system is not tracking policy-level commission, you will end up building a spreadsheet to track invoices, transfers, carrier payments and commissions — a large recurring cost. Price the engagement accordingly, or push for the system to be used properly.

The client has no system at all. Ask directly how the client tracks policies. If the answer explains how commissions work rather than naming a process, they do not have one — and that is the conversation to have before the engagement, not after.