A situation arose this last month regarding “Broker Fees”.  I’m going to simply define “Broker Fees” as charges passed onto an insured by a producer which are in excess of the Carrier’s premium. Producers like to charge these fees because of the extra added income from each policy sold.  Consumers don’t like these fees because they wind up paying money that is not reflected in the premium itself.

Since all of our affiliates are Independent Contractors they are free to set their charges for issuing a policy as the market, the carrier and the law permit.  Unfortunately it seems that the later two of these three conditions is being ignored at times.

A Carrier in appointing a Producer can set conditions on fees the Producer may charge in addition to a policy premium.  If the Producer disregards these conditions, the Carrier will quickly pull the Producer’s appointment.  Thus a Producer should pay close attention to their appointment paperwork before endeavoring to charge an insured monies in addition to the actual premium.  In many cases, the only page Producers read in their appointment is the amount of commissions.  In today’s legal environment, this won’t work.

If you look at the insurance code in just about any State, they address whether a Producer can charge Broker Fees or not.  Realistically Pacific Crest cannot advise a Producer on whether their state permits charging Broker Fees because it is a question either for their State’s insurance commissioner or their own attorney.

As an example, California has recently revised it’s approach to Broker Fees and a brief summary of the legislation provides the following requirements:

  • The consumer must agree to the fee in advance, after full disclosure;
  • The fee cannot be charged on a CAARP, FAIR or “Low Cost Auto” policy;
  • The broker must provide the insured with a specific disclosure form;
  • The broker cannot be appointed with the Carrier under whom the coverage is being written;
  • The broker and consumer must sign a fee agreement containing defined information;
  • The broker must have a broker bond in force with the Department of Insurance;
  • The broker must disclose the broker fee at the time the of the quotation.

On the other hand, Oregon requires that a producer be licensed as a producer and also as an “insurance consultant”.  The producer must have 5-years experience to become licensed as a consultant.  Arizona in addition to other requirements dictates that the producer may charge a fee “for services not customarily provided in the transaction of insurance if the fee is filed with the director”.

If you are considering charging a “broker fee”, review your appointment; check with your insurance commissioner; and it wouldn’t hurt to get an opinion from your attorney as to the legality of charging such a fee.  A violation could result in consequences that none of us want to even consider.

Posted 11:52 AM  View Comments

Share |


No Comments


Post a Comment
Name
Required
E-Mail
Required (Not Displayed)
Comment
Required


All comments are moderated and stripped of HTML.
Submission Validation
Required
CAPTCHA
Change the CAPTCHA codeSpeak the CAPTCHA code
 
Enter the Validation Code from above.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive


View Mobile Version
Join Our Alliance
Meet Our Alliance
Meet Our Most Valuable Player Alex Pieters Pieters Insurance - Minden, Nevada MINDEN, Nevada — A small community of just more than 3,000 residents east of the southern tip of Lake Tahoe, Minden, Nevada, is a quiet little town in the heart of the Carson Valley.

For just about a quarter of a century, Alex Pieters was one of a handful of police officers in the county seat of Douglas County.

Knowing the community as he does, it made sense that Alex would hang his shingle in this community that once boasted it was a getaway destination for some of the biggest names in Hollywood, including Clark Gable and Jean Harlow.

Alex understands that to succeed in a small town, being competitive with price is important.

Pacific Crest Independent Insurance Alliance
"We are real people who foster trust through relationships, practice integrity with action and empower you to write your own story"

HOME    CLIENT SERVICES    BECOME AN AGENT    ABOUT US    PARTNERS    LOCATIONS    CONTACT US   FOR AGENTS   SECURE LOGIN
Copyright Pacific Crest Independent Insurance Alliance. All rights reserved. Powered by Insurance Website Builder
Blog RSS
Home Client Services About Us Partners Locations Contact Us Insurance Website Builder