Glossary
Fiduciary Accounting
Accounting performed by an entity holding funds on behalf of another party. Insurance agencies act as fiduciaries when collecting premiums for carriers.
Fiduciary accounting is governed by the principle that the funds aren't yours — they belong to someone else, and you're responsible for safeguarding and reporting on them. For insurance agencies, the fiduciary duty extends to premiums collected on behalf of carriers and to client funds held for renewal.
Practically, fiduciary accounting means trust accounts cannot be overdrawn, must be reconciled regularly, and every penny must be traceable from receipt to remittance. State insurance regulators (and the GLBA Safeguards Rule at the federal level) audit against these standards.
Most generic accounting software wasn't built for fiduciary workflows. That's why insurance-specific reconciliation tools are essential to demonstrate compliance during audits.
See also
- Trust Account — A segregated bank account where an insurance agency holds premiums collected from clients on behalf of carriers. Strictl…
- Premium Reconciliation — The process of matching the premiums collected by an insurance agency to the deposits and commission statements received…