USA Insurance Double entry

[jsmith]

If I were an insurance company how would the individual claims work in accounting? Would it be a sub-ledger and which accounts would you debit/credit. I am new to accounting and wondering how that would work.

 

[DrStrangeLove]

I've worked in insurance for 24 years, on various life/A&H lines. Claims are entered through a claims admin system, and are fed automatically to the ledger normally on a daily basis. The particular accounts used, and whether they are debited/credited depends on the insurance products, the kind of benefits/claims being paid, and the particular design of the ledger being fed. The company's Finance department, which is where most accountants would be, doesn't normally make manual entries except for corrections or exceptions-to-process.

In broad strokes, benefits claims use the same basic flow: 1.) Benefit Expense DR/Benefits Payable CR when the claim incurs; then 2.) Benefits Payable DR/Cash CR when the claim payment is sent out. There are also entries when claims are in course of settlement (the claim has been received but not yet approved for payment) or resisted (the insurer disputes the claim), but those are generally left-hand/right-hand reclass entries without any real effect.

 

[jsmith]

I've worked in insurance for 24 years, on various life/A&H lines. Claims are entered through a claims admin system, and are fed automatically to the ledger normally on a daily basis. The particular accounts used, and whether they are debited/credited depends on the insurance products, the kind of benefits/claims being paid, and the particular design of the ledger being fed. The company's Finance department, which is where most accountants would be, doesn't normally make manual entries except for corrections or exceptions-to-process.

In broad strokes, benefits claims use the same basic flow: 1.) Benefit Expense DR/Benefits Payable CR when the claim incurs; then 2.) Benefits Payable DR/Cash CR when the claim payment is sent out. There are also entries when claims are in course of settlement (the claim has been received but not yet approved for payment) or resisted (the insurer disputes the claim), but those are generally left-hand/right-hand reclass entries without any real effect.

Would each claim be broken out into sub ledgers? where each claim can be broken out into separate accounts.

 

[DrStrangeLove]

Would each claim be broken out into sub ledgers? where each claim can be broken out into separate accounts.

No. A company might have different kinds of products on different administrative systems, and there is usually a claims administration system, especially for health, disability or long-term care claims. But those are IT systems, not accounting systems; there isn't a subledger or subsidiary journal for claims.

Subsidiary journals are just a way to condense the number of repetitive journal entries into a manageable number of transactions, so the general journal is less likely to have errors in it. (Why have the general journal handle 50,000 sales transactions? Book them into a subsidiary Sales journal, and then move the total once.) But with modern IT systems and databases, those sales transactions are handled by IT systems, not people, so it's really not as inconvenient anymore.