The premium solvency management system Paulmar Software, Inc. developed includes two sets of management procedures: one for daily operations, another one for financial solvency reporting.
Daily operations management comprises procedures for receipts and disbursements of funds. Financial documentary evidence and reporting procedures are based on accurate accounting records.
Daily Operations Management
Procedures have been developed to enhance and automate the daily management of the following activities:
Transacted and endorsement premiums are caused to be received by the agency on or before the policy schedule due dates. Unlike in other service industries, the P&C insurance industry standard calls for payments to be made before the service is rendered. To have insurance coverage for the month of January, for example, an insured must pay the premium on or before January 1st.
The receivable aging concept is abandoned. Inadequate receivables management in current practice has been a major factor of trust funds insolvency.
Since billing is used in the insurance industry to remind policyholders to make payments they already agreed to, Paulmar has developed an automatic self-administering billing and follow-up procedure that secures the receipt of premiums on policy premium schedule.
Account details are available to review the billing schedule and monitor current billing and payment receipts.
All premium receipts are tracked to their final destination which is the trust bank account. Tracking of bank deposits is done at the policy level. There will be no doubt in the future that payment checks are deposited in the trust bank account. Account details are available to monitor the bank deposit of each payment check.
Earned commissions are calculated based on bank deposits to make sure any commission transfer is from funds already existing in the bank account. Commission losses due to return premiums or NSF checks are also calculated and included in the commission transfer memos. No commission transfer is permitted unless the commission is earned. Exception is made when sufficient personal funds are maintained in the trust bank account.
Account details are available to relate commission transfer payment receipts and bank deposits. All commission transfer memos are saved for future tracking and audit.
Records of the company statement premiums are created and automatically reconciled with the agency records. Variances are reported and disputed items listed on the remittance check voucher. A second voucher may be generated to remit disputed items. Remittance check vouchers have management value as they list current premium remittance, previous remittance, and remaining disputed items. The voucher total always matches the statement premium.
Premium remittance is managed at the policy level. No premium remittance is permitted unless funds have been received and deposited in the bank account.
Account details are available to relate premium remittance to payment receipts and bank deposits. All remittance vouchers are saved for future tracking and audit.
Return premiums, either caused by endorsements RP or final audits, are continuously monitored and reported. Also monitored are net premium and commission reimbursements by insurance companies or from the agency operating account.
Returned premium refunds are reported due after return net premiums are reimbursed by insurance companies. Premium refund vouchers are generated for both insureds and finance companies.
Returned premium used by an insured to make a payment on another policy is properly credited and reported.
Financial Solvency Reporting
More than 65 ledger accounts are used to record all possible premium transactions. In the Paulmar system premium data and accounting records are one and the same. One source of major problems in current management practice is the existence of two systems of records with no connection to each other, premium data and premium accounting records.
The Paulmar system generates two basic financial reports:
Based on these reports two other reports are made prepared:
All financial reports are generated at the policy level. They can be aggregated to include all policies underwritten by one carrier, or all policies written by an agency (direct billed policies are not included).
For audit purpose audit trail reports are generated for each of the 65 ledger accounts.
For more information on financial solvency reporting refer to the Accounting pages.