Financial exams

The Office of the Insurance Commissioner (OIC) conducts financial exams to protect consumers by making sure producers are complying with the law. We may also examine your records in response to a consumer complaint.

RCW 48.03.020 (www.app.leg.wa.gov) grants us authority to examine your records.

RCW 48.03.030 (www.app.leg.wa.gov) requires you to make your records available to us and participate in the exam.

About examinations

An exam is a review of your books and records to verify you have properly handled the consumer's money and transacted the business of insurance within the requirements of the law. This review can include elements verifying that:

  • Coverage was placed
  • Return premiums were properly refunded
  • Separate premium account has been managed properly
  • Required bonds have been secured and maintained in the proper amount

If you are a surplus line licensee, the examination often requires making sure affidavits are appropriately filed and taxes are paid as required by RCW 48.15 (www.app.leg.wa.gov).

When an agency is examined

Our examiner will write or call you to set up an appointment and tell you which records we'll want to review.

We will review any records that will assist us in making sure you are properly accounting for the fiduciary monies you receive and the consumer is receiving the coverage represented. All of the records we request are records you are routinely required to keep by both federal and state laws. Examples of the records we might request:

  • Bank statements and bank reconciliations for separate premium account(s) and operating account(s)
  • Customer receipts for payment of premium
  • Check registers for separate premium account(s) and operating account(s)
  • Deposit receipts (itemized)
  • General ledger (comprehensive and detailed for separate premium account and all agency operating accounts)
  • Balance sheets and income statements/profit and loss for each month
  • Accounts receivable and accounts payable records
  • Commission statements for insurance companies
  • Agency-insurer agreements
  • Agency bill statements from surplus line brokers, MGAs, agencies and all other records demonstrating coverage placement
  • Unearned commission and cancelled policy premium refunds
  • Insurance producer and/or surplus line broker bond, if applicable
  • Sweep reports from insurance companies
  • Record of policies placed during the examination period (include insured client's name, insurance company/broker/agency name, premium amount, policy number, type and term of coverage)
  • Statistics on business volume and premium (book of business) for insurance policies and bonds placed during the examination period (number of policies and total premium)
  • Policy files (hard copy and electronic)
  • Fee disclosure forms

Additionally, our examiner may ask to interview the owner of the business, employees, insurance carriers, referring licensees, agencies you place business through, customers, you, or any other relevant parties to verify the consumer's interest is protected.

When the examiner arrives

Our examiner will make introductions and give you a brief overview of the exam process. He or she will explain the period and scope to be covered by the exam, and ask about your business. We refer to this as an entrance interview.

Reviewing the exam results

Our examiner will schedule a meeting to discuss the results of the review. If any problem areas have been identified, they will be discussed at this time. In most cases our examiner will summarize any issues identified and provide a written recommendation to you on an Accounting Review Form.

In some cases you may be notified of the results by phone or mail. We refer to this meeting, or the less formal phone conference or mail notice, as the exit conference.

In all instances, you may request a formal meeting to discuss the results of the exam.

If you disagree with the examination findings, you have the right to present additional information to us that you believe addresses the concerns our examiner has identified. You'll need to submit this information to us in a timely manner if you want us to consider it.

When the examination is completed

If there are no serious findings, your examination is closed and the examination process is terminated. Most examinations will not result in serious findings.

If our examiner finds that records are not properly or completely kept, we may require you to reconstruct them and set a date for a follow-up examination.

In rare circumstances, our examiner could refer you for administrative action. If this occurs, you will be notified.

Updated 08/01/2014

See also

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