PRACTICAL GUIDE
Agency Bill vs. Direct Bill: How the Money Moves
The billing method determines who collects premium and which balances the agency needs to explain. Start by tracing the customer’s payment, the carrier’s share, and the agency’s commission as separate parts of the same transaction.
Who collects the premium?
| Question | Agency bill | Direct bill |
|---|---|---|
| Who bills the customer? | The agency or brokerage | The carrier |
| Who generally receives the customer’s premium payment? | The agency or brokerage | The carrier |
| How does the agency receive its commission? | Commonly retained when remitting the net amount, subject to terms | Paid separately by the carrier under the arrangement |
| What does the agency reconcile? | Billing, receipts, commission, carrier payables, and remittances | Expected commission transactions against carrier statements and payments |
Installments, premium finance, fees, taxes, credits, and individual agreements can change the detail. Establish the actual arrangement before using a generic workflow.
Gross premium and net payable are different figures
A $10,000 invoice and an $8,500 carrier payable can both be correct. Comparing those totals without identifying what each represents creates an apparent $1,500 exception. Label the basis of every amount before trying to resolve a difference.
Now suppose a $2,000 return premium and a $300 commission reversal are recorded. The corresponding net credit would be $1,700 under the same simplified assumptions. Trace both components; applying only the gross credit would leave a different problem.
Follow one transaction through the workflow
- Identify the policy or bond and the specific transaction: new business, renewal, endorsement, installment, or cancellation.
- Check the billed premium, commission, and any separately recorded amounts.
- Trace receipts and credits to the customer balance.
- Compare the carrier statement with the agency payable and prior remittances.
- Explain any differences, document the review, and prepare the approved settlement.
Customer collection status and the carrier’s payment deadline are separate questions. A customer’s unpaid invoice does not, by itself, establish that the agency can defer the carrier payment. Use the applicable agreement and terms.
What to gather when the balance does not make sense
Bring the carrier statement, agency transaction detail, customer invoice, receipt history, and carrier-payment history together for the same cutoff. Keep the policy number, transaction reference, and dates visible. A useful review should explain the difference and identify what happens next.
When asking for help, describe the two amounts being compared and attach the supporting records. “The statement shows $8,500 net; our payable shows $8,250” gives the reviewer a more useful starting point than “this balance is wrong.”
Common questions
- Who collects the premium under agency bill?
- The agency generally bills and collects from the customer, then remits to the carrier under the applicable agreement.
- What does direct-bill reconciliation compare?
- It compares the expected commission with the carrier’s reported commission and the related receipt, using consistent references and dates.
- Does customer payment decide the carrier due date?
- The carrier agreement controls the obligation. Customer collection status alone does not determine when payment is due.