Insurance Agency Due Diligence Checklist for Buyers
An insurance agency’s value sits in records most buyers never see until due diligence: commission statements, retention reports, carrier contracts, producer agreements and client files. A seller’s summary may show steady revenue, but due diligence is where a buyer learns whether that revenue comes from clients who will stay, carriers that will keep the agency appointed and producers who will not take their accounts elsewhere.
This checklist organizes the areas buyers, their advisors and their lenders typically review in insurance agency due diligence. It should be used alongside legal and accounting advice. For the overall purchase process, see our guide on how to buy an insurance agency.
How to Use This Checklist
Request documents in stages, starting with the items that determine price and financing, such as financial statements, commission records and retention history. Compare what you receive with what the seller told you, and keep a running list of issues that may affect price, structure or your decision to proceed.
1. Financial Records
- Business tax returns for several years.
- Annual and monthly profit and loss statements and balance sheets.
- Bank statements to reconcile deposits with commission income.
- A schedule of proposed add-backs with support.
- Payroll records and producer compensation detail.
2. Commission Statements and Revenue Detail
- Commission statements from each carrier for several years.
- Revenue split between new business and renewal commissions.
- Contingent, profit-sharing and bonus commissions, shown separately by year.
- Revenue by line of business and by carrier.
- Fee income, if the agency charges service or consulting fees.
- Any commission chargebacks or return-of-premium adjustments.
Our article on insurance agency commission revenue explains how to interpret these figures.
3. Retention and Client Data
- Client and policy retention by year, line of business and carrier.
- Policy counts and premium volume trends.
- Revenue by client, identifying the largest accounts.
- Renewal calendar showing when major accounts renew after closing.
- Client files and data quality in the agency management system.
4. Carrier Relationships and Contracts
- Agency agreements with each carrier, including termination and assignment provisions.
- Whether a change in ownership requires carrier consent or new appointments.
- Commission schedules and any production requirements.
- Any carrier notices, restrictions or terminations.
- Relationships with wholesalers or other market-access arrangements.
See our guide to insurance agency carrier appointments, licensing and E&O.
5. Ownership of the Book
- Confirmation that the agency owns its expirations.
- For captive or partially captive arrangements, what the carrier permits.
- Producer agreements that address who owns accounts.
- Any prior book purchases, with payment obligations still outstanding.
6. Producers, Staff and Owner Role
- A staff list with roles, licenses, tenure and compensation.
- Producer agreements, including non-solicitation, vesting and book ownership terms.
- Revenue by producer and by account manager.
- The owner’s personal role with key clients.
- Key employees likely to stay or leave after the sale.
See insurance agency producer dependence.
7. Concentration
- Share of revenue from the largest carrier.
- Share of revenue from the largest clients.
- Dependence on any single program, association or referral source.
See our article on insurance agency carrier concentration and client concentration.
8. Licensing and Compliance
- Agency and individual licenses in each state where the agency operates.
- Any regulatory complaints, inquiries or actions.
- Continuing education and license renewal status for producers.
9. E&O and Claims History
- Errors and omissions policy, limits and claims history.
- Any pending or threatened claims.
- Plans for coverage of the seller’s prior acts after closing.
10. Trust Accounts and Premium Handling
- Whether the agency collects premiums directly (agency bill) or carriers bill clients (direct bill).
- Premium trust account records and reconciliation.
- Any amounts owed to carriers.
Premium handling practices affect both risk and working capital and should be reviewed carefully.
11. Systems, Office and Contracts
- Agency management system, data ownership and transfer rights.
- Website, phone numbers and marketing accounts.
- Office lease terms and assignment provisions.
- Vendor and technology contracts.
Questions to Ask the Seller
- Which clients would leave if you were not involved?
- Which carriers are most important, and how are those relationships?
- Do any producers believe they own their accounts?
- Have any large accounts been at risk recently?
- Have there been any E&O claims or complaints?
Common Red Flags
- commission income that does not reconcile to deposits
- declining retention or a shrinking policy count
- heavy reliance on contingent commissions
- unclear book ownership or missing producer agreements
- carrier contracts that terminate on a change of ownership
- unreconciled premium trust accounts
Frequently Asked Questions
What is the most important part of insurance agency due diligence?
Confirming that commission revenue is real, recurring and transferable, including retention history, carrier relationships and who controls client relationships.
Should I speak with carriers during due diligence?
Often, yes, at the appropriate stage and with the seller’s agreement, since carrier consent or appointments may be needed.
What about E&O claims from before closing?
Coverage for prior acts should be addressed in the purchase agreement and insurance planning. Review with advisors.
Financing Your Agency Acquisition
US Professional Funding helps qualified buyers finance established insurance agencies and books of business. Learn more about our insurance agency acquisition financing.
