Home › How to Conduct Due Diligence When Buying an Insurance Agency

When you’re considering buying an insurance business, you’ll make sure that you’re comfortable about investing. With the help of a trusted insurance consulting firm, you can assess the value of the agency and the risks associated with buying it. Due diligence refers to the process of conducting a comprehensive appraisal of a business so that you can have a stronger position for negotiation.

an Insurance Consulting firm can help you conduct a smooth due diligence process

What You Should Do When Conducting Due Diligence Process

Establish an Organized Virtual Data Room

Once you’ve completed a preliminary overview investigation of your target agency and signed a term sheet or letter of intent, the next step is to dig deep into corporate data. You’ll have to look into the agency’s finances, ownership of assets, sales records, personnel records, and customer information.

An excellent way to expedite the due diligence process is to set up an organized virtual data room. Besides making the transaction comprehensive and transparent, having a secure central online document repository with fully searchable and indexed information reduces the time it takes for you to make an educated decision.

Understand the Financials

You’ll want to see the agency’s tax filings, annual reports, profit and loss statements, general ledger, and accounts payable statements. While you’re at it, check the schedule of accounts receivable by category and the agency’s credit policy and collection procedures.

Check Assets and Inventory

Besides verifying the agency’s ownership, status, and control of their assets, you should also determine those assets’ strength and economic value. Additionally, figure out the potential infringement liability.

Look Into Outstanding Liabilities

Identifying cases of unresolved litigation is a crucial component of the diligence process. After all, you wouldn’t want to deal with lawsuits or threats of litigation that may surface after the deal is closed. These exposures are typically related to past or present customers, past or current employees, vendors, intellectual property issues, or company practices.

an insurance consulting firm helps you ensure a smooth buying process

Looking for an Insurance Consulting Firm?

With Energia Consulting Partners, LLC, buying an insurance agency will be a smooth process. Contact our office today to schedule your appointment.