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"Ask an Expert" Briefs
Agency Bank Accounts and Comingling of Funds
An agency has both a premium trust account and an operating account at a local bank. The agency owner has been told by some other agents that separate accounts are not necessary. Is this correct? Is it a legal issue or a “best practices” issue?
Accounts Receivable Statistics
Do you have a good handle on your accounts receivable for agency-billed business? How do you measure up to industry standards or best practices ranges?
Agency Customer Drop Box for Premium Payments
An agency would like to provide additional services to valued clients. One of the suggestions was to provide a drop box for customer payments for both agency and direct bill payments assuming it would be used after hours and on weekends. From an E&O perspective, what are the risks of providing this service? Would a disclaimer on the drop box lessen the risk?
Agency Liquidity Ratios
It is almost embarrassing to say, but most insurance agents reckon their success by the balance in their checkbook. They don’t pay attention to those superb Operating Statements (Profit & Loss Statements) produced by their expensive Agency Management Systems and most don’t even print their Balance Sheets because either they don’t recognize the importance of the information contained in them – or they wish to bury their heads in the sand because they feel that what they don’t know about the health of their agency can’t hurt them. WRONG! WRONG! WRONG!
Company Payment Obligations
An insured's account renewed in May, but the policies were not delivered until June. The agent believed that late delivery made these policies June items, payable to the insurer by August 15, 45 days following closing of the June account. However, when the insurer didn't receive payment on the policies by JULY 15, they put out direct notice of cancellation to the client! Is that right?!
Does an NSF Check Constitute Nonpayment?
An insured makes a payment by personal check on a policy that is scheduled to cancel for nonpayment. The check is received before the cancellation date and the company issues a reinstatement notice. Three weeks later, the insured and agent receive another cancellation notice stating that the policy is cancelled retroactively to the previous cancellation date because the check was returned 'NSF' by the bank for 'insufficient funds.' Is this correct? For the answer and an important message about the value of your state association, keep reading....
The time that your staff spends on collection is much more expensive than the returns. If you establish a procedure that suggests that payment will be made by the agency if the insured does not pay a direct billing, legal precedent exists for an assumption of the same expectation in the future. A warning to agents who are direct billed but continue to advance money on behalf of personal lines clients -- Stop Now!
Hidden Assets in Independent Agencies
A respected client of the Agency Consulting Group recently analyzed the impact of direct bill income on the working capital and asset base of their independent agency. They found it difficult to maintain a 'healthy' 30 day working capital requirement to satisfy financial institutions because of a conversion of much of its premium base from agency bill to direct bill. Our investigation revealed a hidden asset...
Renewal Surcharges for Loss Experience
One of your insurers has initiated a surcharge program for renewals of insureds who have had even a single claim in the past three years. Is this legal? Is it equitable? What do you think? To find out what our faculty think about this, read their heated debate.
Trust Account Issues
We've recently received several questions about trust accounts. How does an agency with an internal premium finance program know if it is in or out of trust? Can a trust be held in an interest bearing account? In this article, we'll take a look at some of these issues. As other arise, we'll be updating the article.
Independent Insurance Agents & Brokers of America, Inc.
127 South Peyton Street
Alexandria VA 22314
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