Catch Problems Before They Catch You: Conducting an Internal File Audit

In an insurance agency, client files showcase relationships, compliance, and business practices. Your agency management system should allow you to “see” the story of every client interaction. A client’s file should include the “who, what, where, when, and why” of each action, providing proof of what was done and why. As you know, maintaining consistent and detailed documentation can be time-consuming, which sometimes leads to gaps or inconsistencies. This is where a file review, or internal audit, becomes essential. Many agencies either assign an individual or use a team approach to regularly review files, ensuring adherence to agency procedures and proper documentation. A structured internal file review process is not just a best practice—it is a critical safeguard for operational efficiency, compliance, and E&O risk management.

Individual Approach: Typically, a department manager, operations manager, or agency owner will review 3–5 client files for each employee. These reviews are often conducted on a monthly or quarterly basis. This approach allows leadership to monitor compliance, identify documentation gaps, and provide targeted coaching while keeping the workload manageable.

Team Approach: Some agencies use a team-based approach to auditing client files. In this method, each Account Manager or CSR is assigned a person, and they review a set number of files using a standardized checklist. After completing the review, the checklist and findings are submitted to a designated individual who manages the audit results, tracks corrective actions, and follows up on any issues. This approach encourages accountability, allows staff to learn from each other, and ensures that file reviews are consistent and documented, while still providing a clear process for resolving gaps or errors.

Creating an Internal File Audit in an Agency

• Set a Schedule
  Choose a frequency—monthly, quarterly, semiannual, or annual—and stick to it. Consistency is more important than perfection.
• Use a Standard Checklist
  Define the required documentation for each file type. A clear checklist keeps file reviews objective and ensures nothing is overlooked.
• Select a Representative Sample
  Review a mix of new business, renewals, endorsements, and claims. Random sampling provides a realistic view of everyday operations.
• Document and Follow Up
  Record findings, assign corrective actions, and track completion. Without follow-up, a review is just a paper exercise.

A file review process works best when it is viewed as a quality assurance tool, not a disciplinary measure. Communicate its purpose to all staff prior to implementation. It’s intended to help protect the agency, improve service, and support staff development. Make sure to celebrate improvements and share positive trends just as often as corrective ones.

What Should Be Documented in Each File
Documentation in a client’s file should follow established procedures and workflows. When creating a file review checklist, it’s recommended to base it on your own written procedures. Here are different things to look for in each client file:

• Client information: Ensure the client screen is fully complete with contact details, active policies and renewal dates recorded.
• Naming Conventions: Confirm that agency-established naming conventions for activities and documents are followed consistently.
• First Touchpoint with Client: Verify that it’s easy to see how business was received by the agency. Detailed documentation of initial conversations is critical in an E&O case, as it shows what coverage the client requested.
• Correspondence and Communication: Check that emails, phone calls, and in-person meetings are documented. Inconsistent documentation—such as only a few emails noted despite multiple renewals—can indicate gaps.
• Applications and Data Intake Sheets: Ensure signed applications and data intake sheets are attached to the file.
• Values for Real Property: Confirm proper documentation of RCEs (when used) and evidence that the client selected property values/limits. Coverage decisions should reflect the client’s choice, not the producer’s or agent’s.
• Offer and Rejection of Coverage: Make sure documentation exists whenever coverage is offered. If the client rejects coverage, record the rejection or “no thanks” response, as this can be valuable in the future.
• Quotes and Proposals: Verify that all quotes are documented, even if the client declined the coverage.
• Policy/Declarations Page: Ensure a copy of the policy—or at least the declarations page—is included for each renewal.
• Renewal Review: Check for documentation of outreach or touchpoints prior to renewal. Contacting every client (personal and commercial) at least once per year helps verify changes in exposure.
• Policy Changes and Endorsements: Make sure all policy changes, endorsements, or cancellations are documented. Include the effective date, client authorization (signature or written confirmation), reason for the change, and any carrier communications.
• Claims: Confirm that closed claims are documented with appropriate loss information when applicable.

A consistent and thorough internal file review process gives an agency confidence that client files tell the full story of every interaction, decision, and policy change. By regularly auditing files, agencies can catch small gaps before they become costly errors, maintain compliance with carrier and regulatory requirements, and provide better service to clients. More than just a checklist exercise, file reviews support staff development, reinforce agency procedures, and strengthen overall efficiency. Whether you’re a two-person agency or 500,  you can implement an internal file review audit in your agency today!

Evan Leitch
Swiss Re Approved Auditor
Virtual Agency Solutions/Independent Insurance Agents of Wisconsin