Insurance Agency Due Diligence Checklist

Reviewers usually want to see that the earnings story can be tied to source records. That often includes historical financial statements, tax returns, commission reports, payroll, producer compensation, and a written list of normalization items. Each adjustment should have a reason it would change after a transfer. An undocumented “add-back” is just a hope.

Reconcile the systems. If the agency management system, carrier statements, and tax return do not describe the same revenue, the diligence question becomes “which number is the business?” How to Sell an Insurance Agency Step by Step assumes this package exists before a controlled conversation starts. If it does not, diligence becomes the place where the package is built under pressure.

Policy- and account-level reports should support retention, recurring versus non-recurring items, client concentration, carrier mix, and line-of-business mix. Define each metric the same way every time you use it. A retention figure that changes definition between two exports is not a retention figure. It is two different claims.

Clean what you can before the request arrives: duplicates, missing carriers, missing producers, and households that were split for convenience. Then write down what you could not clean. Reviewers can work with a known limitation. They have a harder time with a silent one that appears in a later export.

Diligence is not only a file review. Reviewers want to know who serves the book, how producers are paid, whether production is owned by the agency or by an individual, and what happens if a key person leaves. Informal handshake deals are still deals. They are just harder to explain and harder to transfer.

List the responsibilities that still sit only with the principal: carrier calls, large-account renewals, hiring, trust accounting, or community relationships that send referrals. How to Prepare an Insurance Agency for Sale treats this as work you can start early. In diligence, it becomes a transfer-risk question. The earlier list is the better version of the later interview.

Gather carrier agreements, producer agreements, employment documents, leases, technology contracts, licenses, E&O records, and corporate documents. Look for provisions that require notice or consent when ownership changes. You do not need to interpret those provisions yourself. You do need to put the documents in one place so qualified counsel can.

Unresolved ownership, expired signatures, and known compliance issues belong on a list before someone else finds them. Insurance Agency Value cannot tell you which consent is required in your state or under your contracts. That is legal work. The owner’s job is to stop treating the filing cabinet as a memory test.

Reviewers may ask how the agency management system is used, who has access, how client data is backed up, and which tools would have to transfer or be replaced. A sale that ignores data access can stall after the commercial terms look settled. Write down vendors, contract end dates, and who holds the administrator login.

Workflows matter here as much as software names. If renewals, claims intake, and certificate requests live in one person’s head, the technology tour will not save the operating story. Diligence is easier when a new person could follow the work without a private tutorial from the owner on closing day.

Use the list to prepare, not to perform. You do not need a theatrical data room for a conversation that has not started. You do need to know whether the files exist. What an Insurance Agency Letter of Intent Usually Covers is often the document that starts a more formal review window. Arriving at that window with a coherent package is the point of this page.

A free directional estimate can sit beside the checklist as a planning baseline while you decide whether the work is worth doing this year. It is not a diligence report and not an appraisal. The files are the diligence. The estimate is only a way to keep the owner’s own expectations in a range the records might support.