The Office of the Insurance Commissioner (OIC) conducts financial examinations to protect consumers by confirming producers are complying with the law. We may also examine your records in response to a consumer complaint.
RCW 48.03.020 (leg.wa.gov) grants the authority to examine your records.
RCW 48.03.030 (leg.wa.gov) requires you to produce your records and facilitate the examination.
An examination is a review of your financial records to verify you have properly handled consumer funds and transacted the business of insurance within the requirements of the law. The 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 confirms certification forms are appropriately filed and taxes are paid, as required by RCW 48.15 (leg.wa.gov).
When an agency is examined
Our examiner will notify you of the examination by email and request documents and records. In addition, the examiner will follow-up with a call to discuss the examination process.
Your agency will be offered a one-hour continuing education webinar on premium handling and provided the opportunity to ask questions. Staff and accountants are welcome to attend.
We review financial records that assist us in determining appropriate accounting for the fiduciary funds received and policy placement. The following are 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, managing general agents (MGA), agencies and all other records demonstrating coverage placement.
- Unearned commission and canceled 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.
The financial examination primarily focuses on the accounting records maintained for the separate premium account and the premium detail provided by the insured. The examiner evaluates the licensee's policies and practices to process and return premium, as well as the existence of adequate accounting records that provide an audit trail.
Pre-examination phone conference
Our examiner will make introductions and give you a brief overview of the examination process. He or she will explain the period and scope and ask about your business.
Review of the examination results
Our examiner will schedule a call to discuss the preliminary results of the examination. Any area of potential non-compliance will be further discussed at this time. An Examination Review Form may follow this call, requesting your acknowledgement of any areas of non-compliance and your agreement to revise policies and procedures.
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. The information needs to submitted in a timely manner to be considered in the examination report.
When the examination is completed
At the completion of the examination, you will receive an examination report by email. If there are no findings, the examination is closed and the examination process is complete.
If the examination results in findings, a follow-up examination will be scheduled to confirm changes have been made to comply with the law and regulations.
In rare circumstances, there could be a referral for administrative action. If this occurs, you will be notified.