Seeing commission income insurer by insurer
How a brokerage sees each insurer's commission every month by giving insurers their own income accounts and posting receipts as it reconciles.
By Achekam · · 5 min read · For Insurance businesses in South Africa, Nigeria, Kenya
Ask a broker which insurer matters most to the business and the answer usually comes from memory: "most of our motor book is with one of them, and the life business is split". Ask how much commission each insurer paid last quarter, and the answer often takes a day of digging through bank statements and insurer portals.
The reason is usually the chart of accounts. Commission from every insurer lands in a single account called Commission income, and the books faithfully add it all up into one number. That number is true and not much use. This article shows how a brokerage in South Africa, Nigeria or Kenya can set up Achekam so each insurer's commission is visible every month, straight from the books.
Why one commission account hides the picture
A single commission account answers one question: how much did we earn? It cannot tell you:
- which insurer's commission fell this month, and whether that is a payment delay or lost business;
- how dependent the brokerage is on one insurer, which matters if that insurer changes its terms;
- whether a new insurer relationship is producing what was hoped;
- which class of business, such as personal lines, commercial or life, is growing.
Those are the questions that drive decisions about where to spend sales effort and which relationships to protect. Since commission arrives by bank transfer rather than through the brokerage's own invoices, the only place to capture the split is when each receipt is posted.
An income account per insurer or per class of business
Each business has its own double-entry ledger with a standard chart of accounts created when the books first open, and accounts can be added, renamed or switched off. That means you can design the commission accounts around the way your brokerage works.
| Approach | Accounts you add | Suits a brokerage that |
|---|---|---|
| By insurer | One commission account per main insurer, plus one for all others | Places most business with a handful of insurers |
| By class of business | One account per class, such as personal lines, commercial, life | Wants to watch product lines more than partners |
| By insurer within a class | Accounts like "Commission: life, insurer A" | Is large enough to need both views, and can manage the list |
For most small and medium brokerages, the first approach is the right start. Name each account consistently, for example "Commission: [insurer name]", so they sort together in every report. Put the class of business in each journal's description, and you can still find it later in the ledger.
Posting each receipt from the bank reconciliation
With the accounts in place, the split happens during the monthly bank reconciliation. Bank lines are matched by suggestion and a person accepts each match. A line not yet in the books becomes a suggested journal a person approves, and that approval is the moment to choose the right insurer's commission account.
Three situations come up:
- One deposit, one insurer. Approve the suggested journal to that insurer's account. This is most of the work.
- One deposit covering several classes. If you track classes too, post a manual journal from the insurer's statement that splits the amount across the class accounts, then match the bank line against it. A business can post manual journals, and an unbalanced one is refused.
- A deposit you cannot identify. Do not guess. Leave it as an explained leftover in the reconciliation and ask the insurer for its statement. Commission posted to the wrong insurer is worse than commission not yet posted.
The person who knows the insurers' payment references should do the approvals, or at least check them. When insurers net clawbacks off their payments, the deposit understates what was earned; recording commission an insurer claws back shows how to keep the gross commission and the clawback apart.
Comparing months, and comparing with budget
Once each insurer has its own account, the reports do the rest.
Management accounts show an income statement for a chosen period beside the period before, both added up from the brokerage's own journals and exportable as PDF or CSV. Each insurer's commission appears as its own line, this month against last month. Export a run of months as CSV and you have a simple table of commission by insurer over the year.
Budgets add a second comparison. A business can set a budget per account and period and compare it with actual figures from its ledger. Set a monthly commission budget for each main insurer at the start of the year, based on the book you expect to place or renew, and the comparison will show early which relationships are running behind.
When a figure looks wrong, the general ledger lists every posted line behind it, so you can see exactly which receipts make up an insurer's month. Nigerian and Kenyan brokerages should note that the ledger screens currently show every amount in rand and the chart is stored in ZAR, so label exported reports in your own currency.
AccountingTools describes this kind of internal reporting in its note on management accounting: reports that track revenues, expenses and variances to help managers act. Commission by insurer is a textbook example.
Keeping the list of accounts manageable
The risk with this approach is an ever-growing chart. A brokerage that adds an account for every insurer it has ever placed a single policy with ends up with dozens of nearly empty lines.
Some house rules:
- Give an insurer its own account only when it is a meaningful share of commission; everyone else goes to "Commission: other insurers".
- Review the list once a year. When an insurer drops away, switch its account off rather than deleting it, so past months still report correctly.
- Never rename an insurer's account to reuse it for another insurer; history would move with it.
- Keep the names and the order consistent, so the management accounts read the same way every month.
Matching insurer deposits in general is covered in reconciling commission paid by insurers.
Getting started
Pull last year's commission statements, rank insurers by what they paid, and create accounts for the ones that matter. From next month, post each deposit to its insurer. After a quarter, the question "how much did each insurer pay us?" will take a minute, not a day.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
