Insurance Trust Accounting

Current Premium Accounting

Insurance Trust Accounting has been long overdue in the P&C brokerage industry. Its recent development was prompted by the need to manage premium financial solvency and enable agency to manage its commission income. For the longest time, premium and return premium accounting has been an adaptation of general business accounting to insurance premium transactions.

All agency management systems on the market today have sold general ledger (GL) accounting as sufficient for premium and return premium transactions. Accountants and CPAs struggle finding ways to report trust funds solvency. Using formulas rather than accounting, they confirm the GL accounting’s inadequacy for premium and return premium transactions.

As adapted for premium transactions,GL accounting proved unable to process the agency “earned” commission. The current practice of transferring commission funds to the agency business account based on “need”,is the second most important cause of insurance trust financial insolvency.

Insurance Trust Accounting

Following the development of Insurance Trust Accounting, Paulmar Group has offered it to P&C independent agents and brokers for more than two years. Uniquely conceptualized, Insurance Trust Accounting is a mirror of premium and premium business transactions. It uses a different ledger of accounts, separate from the agency general ledger, and recognizes the policy transaction as the sole insurance “sales” document. Premium invoice function is reduced to the status of “reminder” of payments.Premium invoice is not an insurance “sales” document (as it is in GL accounting) and therefore its journal entry no longer creates “income” records in the agency general ledger.

Insurance Trust Accounting is branded Trust Ledger (TL) Accounting^TM and is commercially distributed as NOBL Technology^TM. The TL accounting software application fully automates insurance trust daily operations and reliably reports both production and trust financial solvency. It is offered to insurance agencies on outsourcing basis. Agencies will provide source documents, Paulmar Group(outsourcing partner), will create data records and perform trust management functions, such as: billing and follow-up, bank deposits, commission funds transfer, company remittance, return premium refunds, DB Commission Statement, personal (non-fiduciary) funds maintained in the insurance trust bank account. NOBL automatically converts premium and commission data records into accounting records. No manual journal entries are used in TL accounting.

Benefits

The benefits to insurance agency owners are significant:

•    Guaranteed agency’s compliance with fiduciary duty;
•    Peace of mind for agency owners and managers;
•    Complete and accurate accounting records;
•    Total control over premium and return premium funds;
•    Reliable reporting of agency production and trust financial solvency;
•    Significant reduction of agency workload;
•    Opportunity to dedicate agency resources exclusively to sales and service;
•    Choice for agency owners to grow organically with no additional payroll;
•    Potential for the agency to increase profit margin by 20% or more.
•    Reduction of agency E&O risk exposure;

For additional information visit Paulmar website: www.paulmargroup.com or contact Paulmar Group at 800.830.9093