Double Dipper - fee + comission = trouble?

[KPTEE]

I have a friend that charged both a broker fee and a commission on a $1 million on-going ops policy to a developer client. The total comission exceeded 30% of the $1 mil. Broker is in Texas, the project in Nevada. No written agreements between any party. Does the broker have some liability or obligation to return some of the fee or comission since it is excessive? The dev. client is asking for some of the $$$$ to be returned.

[volstrike3]

I am not sure if your friend will have to give some money back but he/she should have trouble sleeping at night.

[houstonagent]

On a commision that high why would you still charge a fee? But in Texas its ok to charge the fees as long as the client is aware of it, and it doesnt exceed more then the comission payment.

[rodgwag]

You should always charge a fee regardless of the size of the commission if the fee is allowed by the insurance carrier and the fee is disclosed to the client. Clients cancel policies all the time. If that happens to you, you will be happy that you collected your fee. This is a 100% honest and necessary practice.

[volstrike3]

[quote="rodgwag"]You should always charge a fee regardless of the size of the commission if the fee is allowed by the insurance carrier and the fee is disclosed to the client. Clients cancel policies all the time. If that happens to you, you will be happy that you collected your fee. This is a 100% honest and necessary practice.[/quote]

That may be the case with non standard auto or small business but taking in compensation equaling 30& of the total premium on a million dollar GL policy is pure greed. The developers lenders will not allow them to cancel policies mid term. That is not a valid concern.

[Porter]

The developer agreed to the fee to begin with and paid it. Why does he want it back now?

[rodgwag]

Clients can cancel on any size account for various reasons, lender involvement or not; even accounts larger than this one. That said, I see it often enough to encourage the charging of fees WHENEVER possible.

I am sure the developer was savvy enough to do some shopping before he purchased the policy. He wants the money back now because he is greedy.

[Insurance101]

Depending on your State laws, charging a fee is acceptable when acting as a broker (not as an agent). In certain states, there must be a written agreement between the broker and the insured outlining the fees being charged. Absent of such signed agreement, there could be an issue with your State Insurance Dept. As far as the amount of the fee, most State laws that allow such a fee state that the fee has to be reasonable, but I have not seen a dollar or percentage limit on the amount (except for certain state plans such as assigned risk, etc...) Again, absent of a fee agreement, if the client is seeking a return of the fees paid, you'd have a pretty hard time winning the case and would probably have to return the fees as well as possibly get hit with fines from your Ins Dept. Then there is the question of ethics. That's obvious.

Then there is the questions of business practices and how you run your business. If you are charging such high fees and the client is not agreeing to them in writing (up front) its a matter of time before you lose your good name in the marketplace as well as lose business on renewal to those brokers that are not charging such fees.

Fees do have a time and place in this business when used properly. It is somewhat of a personal decision of when and how much (as well as abiding by your State's laws). Always ask yourself after the sale if you think the client feels he got a fair deal and whether or not you think you gave him a fair deal.

Sleeping at night is more important than making a few extra bucks.

[INTLXS]

Aren't life commissions 55% to 90% of first years premiums?

Who determines what is excessive? 5%, 20%, 50%???? Usually competition determines this. Clients move every day for lesss money. You can only get more if you provide more services, bring an expertise to the situation or you are the best guy in the world and they want to deal with you at any cost.

Any discussion on what the agent did for the insured?

Did the insured consent to the fee?

Aren't bonds written at 30% commission?

What is the Nevada regulation on the charging of fees?


NRS 686A.230 Illegal dealing in premiums; excess charges for insurance; regulations related to fees of broker, consultant or financial planner; written contract for consultation.

3. The Commissioner may adopt regulations to allow the charging and collection of a fee by an insurance broker, consultant or financial planner:

(a) In lieu of any other charge or commission for solicitation, negotiation or procurement of a policy of insurance which covers commercial or business risks;

(b) For consultation or any related advice on the insuring of commercial or business risks which does not result in the procurement of a policy of insurance; and

(c) For consultation or related advice on the purchase of life or health insurance or an annuity, whether or not it results in the purchase of a policy of insurance or annuity. In such a case, the fee must be set forth in a written contract signed by the client before the consultation begins.

4. An agent or broker who provides consultation or related advice pursuant to this section shall do so pursuant to a written contract specifying the compensation he will receive. The compensation may be in addition to or in lieu of a commission and is not a premium as defined in NRS 679A.115.

(Added to NRS by 1971, 1696; A 1981, 1142; 1985, 1549; 1987, 1038; 1995, 1621)


When in doubt, check the law in that state.

In Ohio. You can get a commission & also charge a fee. The onus is on the agent to show disclosure with the client. Part of the disclosure is that the fee is non-refundable.

Sounds like this insured, talked to their brother-in-law at a family party, was told, "you got ripped off" and I could have done it for less..... rats that gas station down the street was 20 cents less.... I am going back to the gas station, returning the gas and going to the cheaper place..... NOT!!!!!!!

[Rob]

It would be helpful to know how much (as a percentage) commission was paid by the insurance company and how much was the fee that was charged.

[Porter]

Personally I think this guy closed one hell of a pay day but, you folks are right I would not be able to sleep that night. I would be partying my but off and would not have time for sleep.

[Rob]

If it cancelled that would be one helluva chargeback!

[volstrike3]

There was no mention of services provided. If the fee included doing wrap administration and sub-contractor premium allocation, etc then I can see it. If he just placed a $1 million ongoing ops policy and took a commission and fee equaling over $300k, he is pretty greedy in my book. If you guys are ok with that and can deal with the fallout, then go for it. I will continue to make my 10-15% commission with a clear mind and a high 90's retention ratio. IMO- that guy killed the golden goose.

[Rob]

So it appears that his fee was in the six figure range?

[KPTEE]

No underlying services were provided. They ended up cancelling the policy because it was only covering dirt (no building has begun). They have since hired some one else to get the coverage they need. My guy received a letter from a law firm stating they wanted some of the money back and noted a Nevada Insurance code section that said you can't charge more than 20% of the total policy. Or something like that. He is scrared and I think would like to return some of the money.