Guide · 7 min read
Agency bill reconciliation vs direct bill: why each needs different checks
The same carrier can send two statements that look alike and need opposite checks. What agency bill and direct bill are each reconciled against, where the differences come from, and why it takes so long.
TL;DR
- Direct bill statements are reconciled against commission you expect to receive. The usual failure is a line that is missing or short, and nothing on the statement tells you it is missing.
- Agency bill statements (accounts current) are reconciled against invoices you issued and cash you collected. The usual failure is paying the carrier for something you never billed, or crediting yourself the wrong commission.
- Both need your book, your commission schedule and the carrier’s statement side by side, month after month, per carrier. That is why it is slow, and why it is easy to do partially and call it done.
Most independent agencies run both billing types, often with one carrier for different lines, so the statements arrive in the same month and get reconciled by the same person. They are different jobs. This guide is about the reconciliation itself: what each statement is checked against, where differences come from, and where the time goes. For a plain comparison of the two billing types, see our direct bill vs agency bill checklist. We’re the team building Lapidar, a commission reconciliation service that’s still in development. This is general information, and your agency agreements and carrier rules decide the details.
What each statement is reconciled against
| Direct bill | Agency bill | |
|---|---|---|
| The statement says | What the carrier is paying you | What you owe the carrier, after your commission |
| You compare it with | Policies, renewals and endorsements due in the period, and your commission schedule | Invoices you issued, premium you collected, and your commission schedule |
| Money moves | Carrier to you | You to carrier |
| Errors tend to be | Missing, short, or taken back later | Unbilled, mis-credited, or carried forward |
| Who notices if you don’t check | Nobody | Nobody, until a balance is chased |
Direct bill: starting from what you expected
A direct bill statement can only show you what the carrier paid. It cannot show what it didn’t. So matching each line to a policy is half the work; the other half starts from your book and asks which commissions should have appeared this month and didn’t. Those are the ones that cost money.
The differences you find usually fall into a few groups, and most are not errors:
- Timing. A renewal effective on the 28th may be paid on next month’s statement. Whether that is normal depends on the carrier.
- Installments. If commission is paid as premium is collected, one policy becomes a series of small lines. See installment billing. A missed payment by the insured shortens the series without any error by the carrier.
- Fees. A policy fee inside the premium base changes the commission without changing the rate.
- Rate. The rate on the line differs from your schedule, or the carrier applied the new business rate to a renewal.
- Negative lines. Chargebacks that arrive weeks or months after the cancellation, including flat cancellations that reverse the whole commission.
- Annual premium, monthly pay plan
- $2,400.00
- Commission as collected, 12%
- $24.00 / month
- Month 1 statement
- $24.00
- Month 2 statement
- No line
- Month 3 statement
- $24.00
Agency bill: starting from what you billed
On an account current the carrier lists what it has processed for your agency and what you owe. You are reconciling two sets of records, yours and the carrier’s, before you send money. Check that every transaction has an invoice, that every invoice has a transaction, and that the commission taken matches your schedule.
| Policy | Carrier line | Net due | Your invoice | Result |
|---|---|---|---|---|
| EX-31101 | New business | 2,720.00 | Issued, paid | Matched |
| EX-31107 | Endorsement | 340.00 | None | Unbilled |
| EX-31112 | Renewal | 1,360.00 | Issued, unpaid | Not collected yet |
| EX-31118 | Return | −212.50 | Credit issued | Matched |
The unbilled endorsement needs an invoice. The renewal that isn’t collected yet raises a different question: how your carrier’s payment terms treat premium you haven’t received. Neither is a dispute with the carrier. Rules about holding collected premium vary by state; see premium trust account and ask your state regulator or accountant.
Why it takes so long
None of the individual checks is difficult. The time goes into everything around them.
- Every carrier lays out its statement differently. Columns, signs, transaction names and grouping differ, and many arrive as PDFs.
- Policy numbers don’t always match. Carriers reformat them, add suffixes at renewal, or report under a different agency or producer code. Matching is often judgment, not lookup.
- The two billing types arrive mixed. One statement may combine direct bill, agency bill and non-policy lines such as overrides or contingent commission, which follow their own agreements.
- Items stay open for months. A discrepancy is raised, a correction is promised, and it may land two statements later or not at all. Tracking that takes a ledger of open items, kept current.
- The cost of a mistake isn’t visible. A line you missed doesn’t show up as an error anywhere.
A small agency with a few carriers can do this carefully by hand; it’s a recurring day or more each month, and it gets harder with every carrier added. Doing a part of it, such as only checking totals or only the largest lines, is common, and is how missing commissions go unnoticed. Our guide on reconciling carrier commission statements lists the full set of checks.
What Lapidar is for
Lapidar is in development. The aim is to take each carrier’s statement as it arrives, match it to your policies and your commission schedule, and list what is missing, short, duplicated or unbilled, for direct bill and agency bill separately, and to keep the open items until they are resolved. There is nothing to log into yet. Joining the early-access list gets you one email when the first agencies can upload their statements.
Lapidar is commission reconciliation software for independent insurance agencies, in development. Related: direct bill vs agency bill commissions checklist.