Insurance commission reconciliation for brokers

Commission reconciliation means matching each line of an insurer's commission statement to your policy transactions and commission records, by policy, amount and date. Sort the results into matched, unmatched and differences in amount. Investigate the last two and leave any adjustment for a person to approve. Matching insurer statements is routine work, and the decisions that follow stay with people.

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What you need before you start

Matching only works when both sides are in a usable state. Before you open a statement (from the insurer, or carrier in the US), check that you have:

• The insurer statement for the period, in a form you can read line by line.
• Your policy transactions for the same period: new business, renewals, changes, cancellations and refunds.
• Your commission records: the rate or amount you expect on each transaction.
• Policy records that are correct, with the right policy number, dates and client.
• A note of anything already known to be disputed or pending from earlier periods.

The last point saves hours. If last month's difference is still open, a line that fails to match this month may be the same problem, and it should be linked to it.

If the policy number was mistyped when the policy was set up, every later match against it will fail. That is a good reason to check issued policies first, as set out in insurance policy checking.

Rules for matching a line

Write the matching rules down so that every statement is treated the same way, whoever does it.

Start with the strongest key. A policy number plus transaction date is a strong choice, because it points to one thing. If the policy number is missing or formatted differently, fall back to the client name and the period of insurance, and mark the match as weaker.

Then compare the amount. Decide in advance what counts as the same: exactly equal, or equal after rounding. Decide whether you compare premium, commission, or both, and which tax treatment applies.

Give each line one of three results. Matched means the policy, amount and date all agree. Unmatched means no transaction in your records fits the line, or no line fits one of your transactions. Difference means the line fits a transaction but the amount is not what you expected.

Check both directions. Statement lines with no record are one problem. Your records with no statement line are another, and the second can mean commission that has not been paid.

Why lines fail to match

The causes are ordinary. The policy number on the statement is the insurer's old reference. A mid-term change (an endorsement, in the US) produced a small adjustment line that does not match any single transaction. A cancellation was processed by the insurer in one period and by your office in another. The commission rate on the policy differs from the rate in your records. A payment covers several policies in one line.

Timing is another cause. A transaction that happened in your records on the last day of one period may appear on the insurer's statement for the next one. A line that fails today may match next month, and the record should say that is what you expect.

A made-up example: a statement shows a line for a cancelled policy with a negative amount. Your records show the policy as live. Nothing is wrong with the arithmetic, but your records are behind the insurer's, and someone needs to find out which is correct.

Investigating differences and approving adjustments

Matched lines need no more attention, which is the point. Time goes on the unmatched lines and the differences in amount.

For each one, gather what a person needs to decide: the statement line, the policy record, the expected commission, the gap, and the likely reason if there is one. Then the person chooses. They may query the insurer, correct your own record, accept a small difference, or hold the item for next period.

Any adjustment to your books should be approved by a named person, with the reason written next to it. An automatic fix that nobody reviews turns a visible difference into a hidden one. Keep the trail from the statement line to the final decision, so that anyone can see later why a figure changed.

Commission reconciliation and client money are different checks

Matching commission is an accounting check on what the insurer owes you. Client money is a separate check on what you hold for others. Keep the two apart, because a clean commission match does not show that your client money records are right.

For UK firms holding client money, the FCA's rule in CASS 5.5.63 calls for a check "as often as is necessary to ensure the accuracy of its records and at least at intervals of not more than 25 business days". That rule is about client money records, not about statement lines.

The link between them is commission you draw from client money. In a letter to chief executives in July 2021, which the FCA now marks as historical, it said "Firms should only draw down commission after a client money calculation is performed and a surplus has been identified." So matching the statement tells you what commission is due, and the client money calculation tells you whether you may take it. The first is a UK rule and the second is FCA correspondence, both aimed at FCA-regulated firms, and your compliance contact will know how they apply to you.

Statements and bordereaux

A bordereau (plural bordereaux) is a detailed list of policies or claims that one party sends another, mostly in delegated authority and managing general agent work. A broker's office of ten to a hundred people more often deals with an insurer statement or a commission statement, a summary of what is owed for a period.

The matching method is the same for both: decide the key, compare the amounts, sort into matched, unmatched and different. If you do receive bordereaux, the extra volume makes written rules and a named approver even more useful.

For where this job sits among the others in a broker's office, read AI for insurance brokers: what to automate first.

Can AI do this?

Yes, for the matching. A system can compare statement lines with your transactions and commission records and sort them into matched, unmatched and differences, with the likely reason. Your team investigates, approves every adjustment and runs the client money checks.

Where Navicade fits

Navicade builds and runs AI systems that do this work. For insurer statements, lines are matched against your policy transactions and commission records. Your team receives matched entries, unmatched items and differences in amounts to investigate, with any adjustments left for their approval. Results arrive in your existing tools. Insurance decisions stay with your team. The system checks its work on every run and alerts us.

See the row on matching insurer statements, or ask for the free operations map in our contact section. It starts with a free 30-minute call, and we take on one agreed task at a time.