Ca Broker Fee

[d's insurance store]

In the personal lines and small commercial markets, I always viewed the ability to charge broker fees as very market specific. In California a few years ago, the personal lines arena in many large cities had a thriving broker fee structure, often as high as $100 per policy. I always felt that the areas that supported the paying of broker fees were the less sophisticated retail markets where monthly payments were the norm and the likelihood of a policy lasting full term was less because of economic conditions, so the fee kind of made up for the loss in commission for a short term policy.

But, I also feel there was a strong backlash to fees in general because of those charging the higher fees, and thus the law change that outlawed fees for agents.

I imagine there were agencies that made as much on fees as commission income in the 'old' days, and I know it was used in the larger shops to compensate the producers, with the agency keeping the commission. Back in that era, I occasionally charged fees along the lines of $25 to $35 when extra work was involved, but by and large, my specific market area wouldn't put up with fees and shunned agencies that charged them.

Large and medium commercial accounts that are shopped around and require lots of Acords and a great deal of market expertise would seem to better accomodate broker fees...so long as the client benefits from all of that targeted work.

Just my opinion.

[mickeyfridia178]

The only time a broker can charge fees is when they are not an appointed agent (retail, maybe) and then you must give a full and comprehensive disclosure indicating what you are doing for them for this fee. That agreement then becomes subject to the contract law section of the CA Statutes.

[michga11]

Hi -
I'm looking for opinions on fair Broker fees to charge.
I'm an Independent Broker in California doing mostly Commercial P&C, but occasionally touching on Personal Lines. Over the last few years, I've chosen not to charge Broker Fees. Currently, i'm re-thinking that strategy because it takes a lot more work (and money) for a Broker to shop 10 carriers than my captive counterparts shopping 1.
Some of my colleagues charge a flat 10% on everything, others charge $100 - $350. I recognize that the fee should reflect the premium (Not charge $300 broker fee on a $500 premium), and that some of my appointments don't allow them at all.
Any feedback from the community would be great.

Thanks in advance for your time.
~Surfer Ken~

that reminds me again. i've always noticed our agency charges broker fees on accounts that we don't even look at, don't remarket...hell we don't do crap with. be fair and only charge for those that deserve to be charged. there are some accounts where there is constant transactions throughout the year. it's safe to say you could charge a broker fee which they understand what it's for...which is all the work you do for them. they will appreciate if you do a good job too. otherwise, they tell you to piss off.

[Shagster12]

Ken,
Here's my opinion on the topic.
Firstly, if you're shopping 10 markets on an account that generates under $500 - $1,000 commissioned income, you're shopping too many markets and doing too much work, pick 2-3 and focus on them. Cut your time and costs!

Second, my rule of thumb is simple. If you get paid commission do NOT charge a broker fee.

Third, if you're writing without commission then you're only doing it to win on a close deal. That being the case if you charge a BF of 10% you're probably going to lose the deal anyway or why even quote net commission? So a fair BF is going to be what you can charge the client and still win the deal, usually more like 5-7%.

So my recommendation is DON'T go back to using broker fees unless you absolutely have to quote net of commission to win a deal, then charge no more than 7%.

Shagster

[michga11]

Ken,
Second, my rule of thumb is simple. If you get paid commission do NOT charge a broker fee.
Shagster

^^^this right here. thank you, shaggy. i've been trying to tell our agency that. they don't agree with me. i think they are wrong. honestly, we don't deserve the broker fee. we (as in the agency i work for, not me) are constantly charging broker fees on top of commissions, that we do not deserve. we don't get referrals because we are losers. heh.

[michga11]

we charge broker fees on accounts we get 15% commission on. it's rude.

ok. we've gotten better with this, but i've seen it. however, rule here is that if it's placed in a surplus lines and the commission is less than 10%, we will charge a 5% broker fee. i think the 10% is fine as we usually do nothing else with the account throughout the year. this is the crap that makes insurance such a hated industry. lies and greed. i would love to work for an industry that was more about caring about your clients (our job as an agent) than one's selfish greed. maybe i am just cranky because i am ovulating.

[Shagster12]

micha,
I agree your agency is wrong and I'd take every account from them that i got in the door on. All a broker needs to do is show that the client paid you twice for the same amount of effort (if any) and you're toast.

It is a very rare case indeed when my agency charges a broker fee at all. In fact, I have only one client which we use a broker fee for and even that is in their best interest. We quoted their work comp with 10% commission and net of commission. The quote at 10% was $18k higher than the quote net so we charged the client a $10k BF and still saved them $8k by writing the policy net of commission.
Bottom line is this, we get paid for our work and deserve that pay. If we get paid commission we shouldn't get paid again in a BF, check your ethics! If we don't get paid commission then we should get a BF for our efforts that is why we work after all, to get paid.
So if your agency is in Ca. and I run into it, I'll just get a big grin on my face because I know I just found a new client.
Shagster

[michga11]

micha,
I agree your agency is wrong and I'd take every account from them that i got in the door on. All a broker needs to do is show that the client paid you twice for the same amount of effort (if any) and you're toast.

It is a very rare case indeed when my agency charges a broker fee at all. In fact, I have only one client which we use a broker fee for and even that is in their best interest. We quoted their work comp with 10% commission and net of commission. The quote at 10% was $18k higher than the quote net so we charged the client a $10k BF and still saved them $8k by writing the policy net of commission.
Bottom line is this, we get paid for our work and deserve that pay. If we get paid commission we shouldn't get paid again in a BF, check your ethics! If we don't get paid commission then we should get a BF for our efforts that is why we work after all, to get paid.
So if your agency is in Ca. and I run into it, I'll just get a big grin on my face because I know I just found a new client.
Shagster

shaggy, you should hire me. i'm a great employee. sassy, but really super awesome.

[michga11]

oh, and i make a pretty nice salary, so you'd have to match that too. lol.

[michga11]

oh man. the boss man looks really sad and crabby today. i think something else got screwed up. or he's reading this, he does that. keyloggers are a thing in our office. hey buddy, how they hangin'?! (or have they crawled up deep inside?)

*queue's the crying orchestra of emo ceo sadness*

that's just beautiful.

*sheds single tear*