Auditing requirements are inevitable in every type of insurance business, since it is one of the most highly regulated industries in the U.S. But title insurance agencies face the added predicament of facing audits from multiple underwriters.
In addition, depending on where you are domiciled, a title agency will be required to undergo multiple types of audits including:
1. A compliance audit from your state regulator
2. An annual escrow fund audit conducted by an independent CPA auditor
3. A policy audit from each of your underwriters
The only way to successfully manage this audit blitzkrieg is to create a year-round audit strategy – that is – to have a plan in place that keeps you audit ready month-to-month and avoid the scramble that inevitably arises if you wait until the audit is upon you.
Here are a few practical suggestions for keeping your agency financially healthy and audit ready.
Create an Audit Checklist
Have a list of everything needed for each type of audit that you will undergo.
At the end of each month, make sure all of your accounts are up to date: revenue and expenses, accounts receivable and accounts payable, policies and documentation, and of course – most importantly for title insurance agents – a thorough reconciliation of your escrow accounts.
There is nothing more critical in the title insurance industry than reconciling your escrow or trust accounts at the end of each month.
There are so many reasons why reconciliation is a must in the title industry. Title agencies have long been at risk for embezzlement, fraud and, of course, human error both in the agency and within their financial institutions. And yet, far too many firms entrust this important responsibility to employees who lack the training or make it one of a number of responsibilities, resulting in the task getting less attention than it deserves. Monthly reconciliation can bring to light discrepancies that can then be addressed and resolved long before the auditor shows up.
The most effective reconciliation is what is known as three-way reconciliation. Many states require this as part of their insurance department oversight of title and escrow agencies. Three-way reconciliation involves the match-up of:
· Escrow balances
· Book balances
· Bank balances
Comparing each of these balances is the most effective way to reveal inconsistencies that then must be investigated immediately.
At Positively Balanced, we know how important it is to keep you audit ready and our reconciliation services do just that. Making use of industry-leading escrow account management and fraud detection technology, our escrow reconciliation experts offer an unparalleled level of data security, real-time transaction monitoring, fraud detection, audit readiness, and professional independence. Call us today to learn more!