# Bookkeeping for Insurance Agents: Commission Deposits

- Author: AutoBankConvert (https://www.autobankconvert.com)
- Published: 2024-12-07
- Updated: 2024-12-07
- Category: Industry bookkeeping
- Canonical: https://www.autobankconvert.com/blog/bookkeeping-for-insurance-agents

> Bookkeeping for insurance agents: commission deposits from several carriers, chargebacks on cancelled policies and the costs of running an agency.
Bookkeeping for insurance agents centres on commission deposits. Each carrier pays on its own schedule, so every deposit is coded to commission income by carrier and checked against that carrier's commission statement. Chargebacks on cancelled policies are recorded as reductions of commission, and the agency's licensing, lead and insurance costs get their own expense accounts.

## How do commission deposits from several carriers look on a statement?

Commission deposits from several carriers appear as separate ACH credits, each carrying the carrier's name or a payment processor's name, an agency or producer code and a total. An independent agent appointed with five carriers may see five to fifteen commission deposits a month, some weekly and some monthly, and none of them lists the policies behind the total.

Code each carrier to its own income account or class from the first month. A rule keyed on each carrier's description text does this automatically and makes income by carrier a standard report. That report is what an agent uses to decide which appointments are worth keeping and which carriers pay late.

Some deposits are not commissions at all. Bonuses for hitting a production target, marketing allowances from a carrier and refunds of licensing fees need their own lines, even when the same carrier sends them.

## Recording commission chargebacks on cancelled policies

A commission chargeback is money a carrier takes back when a policy cancels or lapses within the period the agent's contract specifies. It may come as a separate debit or as a deduction from the next commission deposit. Book it as a reduction of that carrier's commission income, never as an expense, so income by carrier stays true.

When the chargeback is netted, the bank deposit is lower than the commission earned. Gross the deposit up from the carrier's statement: record the full commission earned and the chargeback as two lines that net to the deposit. This is the same principle a restaurant bookkeeper uses when card deposits arrive net of fees, covered in [restaurant bookkeeping from bank statements](/blog/restaurant-bookkeeping-from-bank-statements).

Agents paid advanced commissions face larger chargebacks, because the carrier paid ahead for months of premium that never came. Track the unearned share of advances in a liability account until the policy passes the chargeback window.

A chargeback report by carrier is also a retention report. When one carrier's chargebacks climb for three months in a row, the agent is usually selling policies that do not fit the customers who buy them, and that is worth raising before the next renewal of the appointment.

### A worked month for one agent

The table below is an example for illustration; carriers and amounts are made up.

| Statement line | Amount | Coded to |
| --- | --- | --- |
| CARRIER A COMM PMT | 2,480.00 | Commission income - Carrier A |
| CARRIER B COMMISSIONS | 1,105.40 | Commission income - Carrier B 1,290.40, chargeback - Carrier B (185.00) |
| CARRIER C AGENT PAY | 3,612.75 | Commission income - Carrier C |
| CARRIER A CHGBK | -340.00 | Chargeback - Carrier A |
| LEAD VENDOR | -620.00 | Lead purchases |
| STATE LICENSE RENEWAL | -50.00 | Licensing and continuing education |

## Agency operating costs: licensing, leads and E&O cover

Agency operating costs repeat every month and fall into a few groups: licensing and continuing education, lead purchases and marketing, errors and omissions insurance, the agency management system, and pay to any staff or sub-producers. A separate account for each group shows the agent what it costs to write a policy.

Lead costs deserve their own account because they swing the most. Comparing lead spending against new commission income by month shows whether a lead source pays for itself. Errors and omissions cover often renews once a year, so a large annual premium can be spread across the months it covers if the agent wants steady monthly results.

Agencies that pay sub-producers or contract staff need the same year-end payee records as any business that hires independent workers. [Bookkeeping for contractors](/blog/bookkeeping-for-contractors) explains how to keep subcontractor payments traceable through the year.

## Is a commission statement the same as the bank deposit?

A commission statement is not always the same as the bank deposit. The carrier's statement lists policies, premiums, commission rates and chargebacks, and its net total should match the deposit. Timing differences, held commissions, debt balances carried forward and a statement covering two deposits can all make them disagree. The deposit is what reached the bank; the statement explains it.

When they disagree, keep the difference in a clearing account until the carrier's next statement settles it. Ask the agent for carrier statements in the same monthly request as the bank statements, because a deposit without its statement can only be coded to the carrier, not checked.

Scanned or partial bank statements cause their own trouble here. If a statement fails its balance check during conversion, the commission lines on it are not trustworthy yet. The guide to [failed statements in a batch conversion](/blog/failed-statements-in-a-batch-conversion) covers what to do next. [AutoBankConvert](/) flags such a statement rather than exporting it, and keeps each agent's carrier rules separate from every other client's.