Premium is not working capital
Most states have statutes on commingling agency working capital with premium collected from customers, and most agents work within them. Simply put, premium collected from clients should be remitted to the insurer promptly, removing the temptation to use the float during a difficult financial stretch. Failing to remit premium can also leave clients without coverage.
Sound practices
- Written procedures for accounting for collected premium that comply with state law and each insurer’s remittance rules
- Using company direct-billing plans where available, removing collection from the agency’s responsibilities
- Periodic independent audits of the agency’s books to discourage employee dishonesty
- A short-term line of credit so a cash crunch never tempts anyone to use client funds
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