DIY Surplus Lines Management: Tips for Starting a Surplus Lines Filing Team

DIY Surplus Lines Management: What to Consider When Managing Surplus Lines Tax Filings Yourself

Surplus lines management can be a complex and time-consuming process, especially if you have licenses in multiple states and write a high volume of policies. Many large agencies have entire teams devoted to filing surplus lines taxes. Along with surplus lines management comes a myriad of ways to both track and file surplus lines taxes. In doing tax filings for dozens of agencies throughout the years, InsCipher has learned through experience what works and doesn’t work. In the end, there are three primary objectives you should consider when trying to undertake surplus lines management yourself:

1. Do It Right the First Time, Every Time!

Have a dedicated staff that regularly researches state rules and requirements and documents their findings in an organized way. There are bulletins and newsletters put out by various surplus lines associations that can help inform you when updates are made. However, these should not be relied upon alone. It is good to proactively check that your tax rates, forms, and filing instructions are up-to-date at least once or twice a year. Incorrect tax calculations and submissions often lead to an agency having to amend a filing and/or re-invoice an insured. In the long run, inaccurate filings often take more time to correct than it would have taken to do the proper research and submit the filing correctly initially.

2. Track What You Do and Prioritize Your Work

Keep detailed records of where you are at in the filing process. Effectively tracking the status of filings and their due dates ensures you will never miss a state filing deadline. Missed deadlines can lead to hefty fines and penalties. In addition, state audits are common, especially with larger agencies, and without an effective filing tracking system, you may be left scrambling should an audit occur. Smaller agencies can utilize spreadsheets for this process, build their own tracking tools within their agency management system, or utilize other third-party online tools to manage this process. If you are going to have a filing team of more than one individual and are using spreadsheets, consider utilizing MS Excel 365 or Google Sheets, which are cloud-based versions that allow multiple people to collaborate on a spreadsheet simultaneously. Regardless of the tools you decide to use, the key here is to be accurate in your tracking. 

In addition, define a clear process for prioritizing your team’s work and plan ahead for state deadlines. Surplus lines due dates can be all over the place throughout the year, but several fixed deadlines come in waves during the quarterly and annual due dates. Ensure that you are adequately staffed and plan ahead so that when these deadlines arrive, your filing team isn’t scrambling to put reports together. Rushing filings can often lead to mistakes, amendments, lost time, and fines.

Lastly, it is essential to keep records in case your filing team changes. Inadequate records can lead to hours of unnecessary reconciliation and rework, which increases the risk of inaccurate or missed filings.

3. Invest in Surplus Lines Management Technology

Look for ways to automate the filing process using technology and efficient workflows. Often people that manage surplus lines believe in the false paradigm there are only two options: either file it fast or file it right. The truth is that there are ways to do both at the same time. Whether you are utilizing spreadsheet macros, designing your own software, or utilizing a third-party automation tool like InsCipher Connect™, investing in technology to automate this process can remove human error from the equation. The key here is to identify the right variables into an algorithm-based tool that outputs an accurate deliverable automatically. Even if you cannot automate the whole filing process from A-Z for all states, you can still find ways to automate several steps or states along the way, making the process as a whole more efficient and accurate at the same time. For example, many states allow for batch or API filing or ACH payments. There are APIs for calculating your SL Tax automatically in your quote/bind system. Even Excel can create some automation for you by utilizing features such as Macros (VBA-based) or creating templates with dynamic formulas that reformat raw policy data into the format the state requires for submission.

While these tools require some upfront investment and ongoing maintenance, the return can often come pretty quickly as the typical filing process is normally very manual to complete. 

To begin incrementally making the process more automated, start with your highest volume and most time-consuming states. Don’t just look at one single event. Consider the entire annual filing process as some states require multiple filings, reports, and payments throughout the year. For example, solutions for states that have quarterly reports may be more beneficial than those states with only annual reports, due to the filing frequency.

The size of your agency will determine how much time and money you can invest in accomplishing the three objectives above. Regardless, being compliant with the various state regulations isn’t something that you can avoid. Establishing a system that tackles these issues in a pragmatic way will save you in the long run and allow you to continue to grow your surplus lines business without having to worry about state regulators breathing down your neck.

Should you have any further questions about how to set up your own surplus lines filing team, we are here to help! We have some tools built into our InsCipher Connect™ platform designed to assist you in managing your surplus lines tax filing process from A-Z. Send us a request to see a demo and learn more.

InsCipher is an insurtech company providing software and services that are revolutionizing inefficient insurance processes. Save your agency time and money by automating surplus lines compliance, filing, and reporting. Want to learn more? Request a free demo today!

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