From Ancient Rome to Your Insurance Agency: The Enduring Legacy of Fiduciary Duty

Accountants (and bookkeepers) fulfill several roles for our clients – risk managers, advocates, confidants, and fiduciary to name a few.  All these roles are vital, but from an accounting view one stands out above the rest:  fiduciary.   The concept of a fiduciary or trustee has spanned centuries and industries, but the core principle is the same:  a fiduciary is expected to act with the highest level of honesty, integrity, and loyalty on behalf of the beneficiaries’ interests. .  

One of the most common phrases when discussing insurance agency accounting is “trust accounting” or “fiduciary accounting.”  We hear it often, but have we ever taken the time to really think about what it means…. to you, to your insureds, to the integrity of our industry?  Each insurance agency should have written processes, frequent internal audits, separation of duties, and clear accountability for handling trust/fiduciary funds within the agency.  

We’ve previously shared the history of accounting—and the idea and concept of fiduciaries shares a similar timeline!

The first documented instance of something being held “in trust,” i.e. on behalf of someone else, was seen in ancient Roman law.  Fideicommissum was a legal principle that allowed property to be transferred to a friend to hold for the benefit of others. 

Centuries later, English common law developed the Roman concept even further and through the use of “uses” and “trusts,” feudal duties and taxes were avoided in addition to property being managed on behalf of another.  Crusaders would often transfer their lands to trustees to manage while they were gone and in case of their demise. 

Around the time of Luca Pacioli (yes, throwing him in this article because he is considered the father of modern accounting, and he is my hero), the legal framework for trusts became more sophisticated, particularly in England, where the Court of Chancery began to enforce these arrangements beyond mere information agreements.  This was a significant shift—it moved trust from being a moral obligation to a legal one…laying the groundwork for modern fiduciary principles.

As British legal principles spread across the world through colonization, so too did the concepts of trust and fiduciary duty. This was particularly evident in the United States, Canada, Australia, and other common law jurisdictions.  Economic changes brought about during the industrial revolution led to the growth of corporations and the modern financial industry, which further expanded the role and importance of fiduciary duties.  Trustees became essential in management investments, estates, and later, pension funds and other financial instruments.

In the 20th and 21st centuries, fiduciary law has continued to evolve.  Various laws and regulations have been enacted to protect beneficiaries.  This has extended into the insurance industry, as well, and each state department of insurance has enacted fiduciary rules, regulations, and guidelines for handling insured funds.  Although insurance agencies generally only hold premiums in trust—and usually for a short period of time–the moral, ethical, and legal guidelines are just as important as any other fiduciary.  Take the time to review your state regulations, and develop a plan to properly handle your insureds’ funds.

About Crystal Temple

Crystal has spent nearly two decades focused exclusively on accounting and bookkeeping for insurance brokers. She has founded multiple bookkeeping groups, one of which was acquired by a prominent AMS provider. Crystal has also served as a controller of an agency group that acquired over 50 agencies in a two-year timeframe. She is the co-founder of a startup called Ricono, building a platform to address some of the technology deficiencies brokers face when trying to measure and manage their financial operations.

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