Agency bill vs direct bill: what's the difference?

The difference between agency bill and direct bill is simply who bills and collects the premium — and that one fact decides how the transaction is accounted for.

Agency bill:

• The brokerage invoices the client.
• The brokerage collects the premium, usually into a trust account.
• The brokerage keeps its commission and remits the net premium to the insurer.
• The books carry premium receivable, trust cash, a premium payable to the insurer, and commission income.

Direct bill:

• The insurer bills and collects the premium from the client directly.
• The insurer pays the brokerage its commission, usually on a periodic statement.
• The premium never touches the brokerage’s trust account.
• The books mainly track commission income and a commission receivable until the statement is paid.

Because the cash runs through the brokerage in agency bill, that flow carries more accounting weight — trust handling, a premium payable, and the obligation to keep trust cash covering what’s owed. Direct bill is lighter on the balance sheet, but it shifts the work to reconciliation: confirming the carrier actually paid the commission you earned.

Most brokerages run both, and mixing up the two is a common source of mystery balances — premiums payable or trust amounts that shouldn’t be there, or commission recognized before it was earned. Note that GST/HST treatment of brokerage commissions has its own rules that don’t follow the premium flow; confirm any tax position with your CPA or the CRA.

For how each flow hits the general ledger, trust, and reconciliation, see our agency bill vs direct bill accounting guide.