NOBL Trust Accounting
Missing Link of Agency Automation
Unlike captive insurance brokers, P&C independent insurance agents and brokers transact insurance products under a Broker-Carrier agreement that grants them the authority to receive and maintain premiums in agency-owned trust bank accounts. Fiduciary laws mandate them to receive and maintain premium funds in a fiduciary capacity and manage them for financial solvency. Due to insurance trust account multimillion-dollar financial traffic, insurance agencies are in fact operated not only as sales and service businesses but also as financial institutions.
While small agencies transact $3 to $5 million/year, large agencies and mega brokerage houses have $100s of million dollars in and out of their trust bank accounts. Insurance Codes of most states require agencies to separate premium funds from the agency’s business operating funds and designate agency owners to become “custodians” of the funds until they are disbursed to legal owners.
The fiduciary component of P&C insurance agencies has been for the most part ignored mainly because of inadequate accounting and certainly because of lack of financial management tools. Agencies are currently using business accounting for premium and return premium funds although their management standards are fundamentally different.
A new accounting system was developed to capture the complexity of premium and return premium transactions and enable agencies’ custodians to monitor and control insurance trust financial solvency.
Paulmar Software has pioneered the effort and after many years of research and development, was able to conceptualize a new trust accounting logic (3) for premium and return premium trust funds. The result of achieving two primary objectives: (1) complete automation of insurance trust account operation (4), and (2) new trust accounting transactions support financial solvency reporting.
NOBL makes available to agency custodians unique trust financial solvency reports:
- Trust Balance Sheet
- Trust Solvency Analysis Report
- Statement of Receipts & Disbursements (aka Float Statement)
- Statement of Trust funds Beneficiaries
- Monthly Statement of Agency Commission & Fees
- Policy Premium Float Analysis
NOBL product is unique. Paulmar principals have written (7) extensively on the need for a solution to the critical financial issues of P&C insurance agencies.
NOBL software includes 8 different products. (1) Trust accounting and financial solvency management require agency owners to outsource all. The complete list includes:
- Receivables (transacted premiums and endorsements)
- Agency & Producer Commission Management
- Insurance Company/General Agency Remittance
- Return Premiums/Cancellations
- Personal (non-fiduciary Funds
- Direct Bill Commission
- Agency Production Reporting
- Trust Financial Solvency Management
The service fee is a usage fee set-up per policy record/policy term. Paulmar is programmed to upload production reports so that a different software application can generate invoices and email them to users.
Very important! Since trust account management, trust accounting and financial solvency reporting are
above and beyond the insurance service, agencies can legally charge a broker/technology expense.
Information on software usage fees will be provided at the end of NOBL demo.
The NOBL demo will focus on two topics: (1) NOBL scope and place in the P&C insurance marketplace and (2) NOBL added value to the P&C agency business operation. NOBL will enhance the agency operation by (a) automating the trust account daily operations and (b) monitoring, controlling and reporting the trust financial solvency as required by Insurance Code.
Briefly presented will be NOBL management functions: Receivables, Agency Commission, Co Remittance, Return Premiums, Cancellation Endorsements and Premium Refunds, DB Commission, Production Reporting, Financial Solvency reporting.
Trust account management will be functionally separated from the agency sales and service management. Due to the complexity of premium and return premium financial transactions, premium trust funds will be maintained in a different ledger of accounts separate from the agency’s business funds.
NOBL will streamline the agency business operation and increase its competitive edge in the marketplace.
After signing the SaaS Agreement, Paulmar will train the agency personnel to prepare data entry source documents and run NOBL. Agency will be able to start working with NOBL immediately after NOBL is set up. The NOBL setup consists of creating data records of the agency’s CRSs and producers, insurance companies, general managing agencies, premium finance companies, setting up printers, etc. The training will focus on preparing source documents, working with data entry windows and running trust management functions, such as: commission income, company remittance, cancellation endorsements and premium refunds, etc.
NOBL will be implemented with new policies and renewals. There will be no disruption to the agency’s ongoing operation. Two agency personnel will be certified to operate NOBL. Designated management personnel will be trained to run production and financial solvency reports.
A two months free-of-charge trial period will allow an agency to decide whether to continue working with NOBL or stop it. No questions will be asked.