Streamlining Carrier Auditing with Synatic

Insurance agents get paid commission by insurance carriers for the products they sell. However, discrepancies can arise between what commissions are paid by carriers and what agencies believe they are owed. Also, payments can be batched and information about this is not often communicated between agencies and carriers. So, agencies rely on the carrier to be accurate.  

To get a clearer picture, agencies usually perform carrier audits and cumbersome annual true ups, but this is done manually and in most cases, it only happens once or twice a year. Agencies get a download from the carrier with every policy that is sold. Then they attempt to reconcile that information with information the agency has in its AMS. The information in the AMS is key because it shows when the commission payments are supposed to begin, how much payments should be, and how often payments should be made.

Carrier auditing is an onerous process, which is why it isn’t done more frequently. Agencies often don’t have a precise figure for the amount they should be paid. One agency aggregator estimated the error was 10 - 15 percent. On a book of $100 million, that’s over $10 million that they could be owed from carriers. Furthermore, if an agency only realizes later that they have been underpaid by a carrier, this leads to inaccurate revenue reporting.

[Related Topic: Automating the Commission Process to Build a Culture of Trust in Insurance Agencies]

Challenges of Carrier Auditing

Agencies aren’t always sure if they have been paid the correct amount from the carrier in terms of commissions for policies sold. Carriers can be 2-3 months behind on their payments, so it may appear in the AMS as a missing payment.  

A missing payment can also occur if a client cancels their policy via the carrier and doesn’t notify the agency. The client might also change their cover with the carrier and the agency will not be aware of the change, which increases or decreases the premium, affecting the commission values. This causes discrepancies between the values coming into the agency’s bank account from the carrier and the expected values estimated by the AMS.

To audit a carrier’s payments, the agency’s finance team has to manually review their ledger and bank statements to determine if they have received money from that particular carrier for policies sold. This is an extremely manual and tedious process that is prone to human error. It becomes a complex task to decipher If the agency is due more commission from a carrier, or if the premium from the carrier is not consistent with what the agency has in its AMS, which can affect commissions.

Synatic’s CommRecon Solution

The Synatic Data Integration Hub (DIH) has a uniquely solution specifically designed to reconcile commission payments between a carrier and an agency.

The CommRecon Solution accesses the agency bank statement that shows the value of all transactions from the various carriers. It also downloads the policy information from the carriers where needed. The policy information in the AMS is further accessed, and the combined information is stored in a secure Synatic datastore.

The Synatic CommRecon Solution automatically cross-references the values downloaded from the carrier with what is in the agency’s AMS transactions. If it finds a discrepancy, a report is created, and an alert is sent to the finance team notifying them that an error needs to be addressed. What’s more, Synatic’s CommRecon compares the commission recorded in the agency’s AMS with the commission paid by the carrier to the agency, ensuring that both figures correlate. In cases where the commission percentage is not available in the AMS, the solution provides the agency with an opportunity to input their estimated correct percentage.

[Related Topic: Building a Seamless Commission Agreement Auditing Process with DataFix]

Benefits of the CommRecon Solution

There are several benefits to using the Commission Recon Solution.

  • The agency finance team can determine the frequency at which they run the solution. This could be monthly, or any other time.
  • It makes it easier and quicker for the finance team to identify problems.
  • It instils confidence in the commission auditing process, giving the agency and its finance team the trust that they are always being paid what they are owed.
  • More accurate commission audits mean more accurate revenue reports. With more accurate information, agencies have better insights to make key business decisions.
  • By reducing the manual effort involved, agency staff are freed up to do more productive, value-adding work.
  • By using Synatic to identify what the commissions from carriers should be, an agency can have much better information on what their monthly commission payroll to producers will be.

Carrier commission auditing is one of those processes that many agency staff struggle with. Even though it is usually done only twice a year, it takes an enormous amount of time and effort, and the analysis of discrepancies is not necessarily highly accurate. Agencies are therefore never quite sure if they have been paid the money they are rightly owed.

With the Synatic Commission Recon Solution, the auditing process is automated and completed in a fraction of the time. If you want to learn how you can run your commission audits more accurately and frequently, ensuring your agency is receiving the correct amount of direct bill commission, contact Synatic today.

Wesley Borain
March 4, 2024
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