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.