Sunday, April 28, 2013

Insurance Trust Account Technology

Many may be unaware that General Ledger (GL) accounting does not work for insurance premium and return premium transactions. As evidence of this inadequacy, one may cite current agency management systems’ inability to generate a Balance Sheet of premium trust funds. Without a Balance Sheet, insurance trust account financial solvency cannot be reported and therefore controlled as required by law. 
Another element of evidence is GL accounting’s failure to create accounting records of insurance policy premium transaction, the true legally binding sale document of an insurance policy.
Replacing GL Accounting
Trust Ledger (TL) Accounting was developed to replace GL accounting in the P&C insurance brokerage industry. Unlike GL accounting, TL accounting can generate trust account Balance Sheets as well as Premium Float Statements (similar to Profit & Loss Statements). The latter are critical in determining trust account cash balance beneficiaries.  
Two Major Developments
Trust Ledger Accounting made possible two major developments: (1) automation of the trust account daily operations and accounting transactions and (2) financial solvency management. Trust account operation is in many ways different than a general business operation; it can also be much more complex. It includes:
1.       Premium Receivables                                        
2.       Agency Commission
3.       Company Remittance
4.       Return Premiums
5.       Personal Funds
6.       Producer Commission
7.       Direct Bill (DB) Commission
Financial Solvency Management includes a reporting system that enables users to monitor and control premium funds financial solvency on a daily basis.
In-House or Outsourcing
Financial Solvency Management may be carried out in-house or outsourced. The first option enables users to outsource software applications such as:
·         NOBL.R for use by P&C insurance retailers
·         NOBL.Corp for use by corporations with multi-producer agencies or clusters
·         NOBL.G for use by P&C general managing agencies (currently under development)
·         NOBL.C for use by insurance carriers (currently under development)
The second option is available to those users interested in outsourcing the trust account management (in the same way they outsource the payroll). Users provide source documents; an outsourcing partner will manage premium and return premium funds from the time they are transacted until they are disbursed to legal owners.
Agencies will receive their commission income while net premiums are remitted to carriers and return premiums refunded to insureds.
Management Outsourcing Technology was developed to render the cost of outsourcing economically feasible and a service deployment with no disruption to the agency’s ongoing business.

Insurance Trust Account Technology, Trust Ledger Accounting and Trust Account Management Outsourcing Technology are trademarks of Paulmar Group LLC.