Things to keep in mind when choosing what type of billing you need to use:
- What is the breakdown for the premium due (down payment, financing, PIF)?
- Are there any non-premium items (Fees, taxes, other)?
- What payments do I need to collect from insureds (Receivables), what funds do I need to send out to carrier/MGA (payables)?
- What Commissions do I need to record and what non-commission revenue do I need to record (Fees)?
With that in mind, here are the types of billing we have:
- DB = Direct Bill.
The carrier or the MGA handles all the billing. The agency does not handle any money. For this type of billing, the agency does not need to generate any records aside from noting the change of coverage AND record commission. There are no Receivables from the insured and no Payables to the carrier/MGA.
- DB with down payment.
DB but with a twist - the agency needs to collect a down payment. The rest of he billing is done by the carrier (as above in DB). There is just one set of transactions to record: Receivable for the down payment and Payable for the down payment (net of commission to the carrier). The fees and commissions remain separate billing types.
- Agency Bill -Paid in Full (PIF)
In this case, the agency is responsible for collecting the entire premium but it is all paid in the beginning. This in effect is similar to DB with a down payment. There is just one set of transactions to record.
- Agency bill with Outside Financing
In this case, the agency collects the down payment and then arranges for a finance company to finance and collect payments for the balance. Practically, it is similar to Agency Bill - PIF above. Agency collects just one receivable and sends out one payable.
- Agency Bill - Full Service
Agency is responsible for collecting all installments on a policy (e.g. a commercial usually has a 25% down payment plus 9 monthly installments).
here are some videos on the topic:
Billing Overview: https://www.youtube.com/watch?v=zFUxyts045s
Paid in Full: https://www.youtube.com/watch?v=neVmwmUCdeU
Agency Bill with Financing: https://www.youtube.com/watch?v=wQ9YJjyKXUE