The Program Administrator Whose Loss Runs Don't Reconcile
You manage a managing general agent (MGA) program writing small commercial package policies for a carrier. The carrier's quarterly bordereau reconciliation shows $12.4M in written premium for the program, but your internal policy administration system shows $13.1M. The $700K gap has three suspected sources: (1) 40 policies bound in the last week of the quarter that the carrier's system hasn't received because the daily upload failed silently for four days; (2) $180K of endorsements processed but not yet transmitted; (3) an unknown remainder. The carrier is threatening to withhold the profit commission and questioning the program's data integrity. The program has $85M in annual premium and a 3-year relationship.
1. Diagnose the reconciliation gap and prioritize what to investigate first.
Read the worked answer
The gap is $700K. The two identified sources account for part of it, but not all, and the 'unknown remainder' is the real risk.
Quantify what's explained:
- Failed upload: 40 policies in the final week. At program average premium (~$85M / policy count - we don't have count, so estimate), this could be a meaningful chunk. Even at $10K average, 40 policies ≈ $400K.
- Endorsements: $180K.
- Together, plausibly $500K–$600K, leaving roughly $100K–$200K unexplained.
Prioritize:
- The silent upload failure first. It's a known, bounded, fixable data-transmission problem, and it's the largest single identified item. Confirm exactly which 40 policies, their premiums, and re-transmit. This is a process failure, not a data-integrity failure - important distinction for the carrier conversation.
- Endorsements second. $180K of processed-but-untransmitted endorsements is a timing issue; reconcile and transmit.
- The unknown remainder is the priority for root-cause. A gap you can't explain is more dangerous than one you can. Possible causes: premium calculation differences between systems, cancellations/rewrites not reflected, duplicate entries, or - worst case - premium not properly accounted for. Investigate before the carrier concludes the program is unreliable.
Key point: The carrier's data-integrity concern is legitimate but the facts suggest mostly timing, not misstatement. The response should be a reconciliation workpaper showing each item, its cause, and its resolution - not a reassurance.
2. The carrier is threatening to withhold profit commission. What is the right operational and relationship response?
Read the worked answer
Withholding profit commission over a reconciliation gap is a contractual lever, and the response should be contractual and evidentiary, not emotional.
First, read the contract. Profit commission is typically payable on reconciled, agreed premium and loss figures. If the contract conditions commission on timely, accurate bordereaux, the carrier has a colorable position - but the gap here appears to be transmission timing, not misreporting. Check: what does the contract say about cure periods, dispute resolution, and the definition of 'written premium' for commission purposes?
Second, produce a clean reconciliation. Build a line-by-line workpaper: opening balance, bound policies, endorsements, cancellations, transmitted vs. received, and the unexplained remainder with a plan to resolve it. Give the carrier a dated timeline for closing each item. A carrier that sees a disciplined reconciliation is far more likely to release commission than one that gets assurances.
Third, own the process failure. The silent upload failure is the program's operational failure. Acknowledge it, fix it (monitoring/alerting on failed transmissions), and show the fix. Credibility is rebuilt with controls, not apologies.
Fourth, protect the relationship commercially. A 3-year, $85M program is valuable to both sides. Propose a joint reconciliation call, offer a temporary hold on the disputed portion only (not the whole commission), and escalate to relationship owners on both sides if the front-line dispute stalls.
Avoid: disputing the carrier's data-integrity concern defensively, or paying/crediting premium to make the gap disappear before it's understood - that would be worse than the gap.