Insurance Journal Forums

I started doing some commercial policies and I am going thru some MGA.
When I get their quotes they charge a broker fee of $150.

My question is can I charge an additonal broker fee for my agency?

And when I disclose it in the broker fee agreement do I write to seperate
agreements for both broker fees or I just disclose mines?

If any one can help I will appreciate it.

Thanks

Depending upon your state, maybe. Some states have limitations on collecting both fees and commissions. If you're state is one that allows both, I would STRONGLY recommend you get a signed agreement showing the insured understands they are paying you a fee in addition to the commission you're getting.

In Ca we charge 150 and call it and agency fee. Seem to be a little more palatable to the client. We have done this way for 20 years.

First, check your status with the California Insurance Commissioner's office. Most agents that do not have additional licenses as a properly licensed "broker" of financial planner of some sort are not allowed to charge and keep a fee that is seperate from carrier compensation. This is so in WA and OR also.

Check it out first, the fines for not doing due diligence are huge!

Swymmer

We do a lot of this but we are not experts. This can become a trap for any agent but here is what we believe after our due diligence.

The following states do not allow you to take both a fee and commissions:
Alaska; Colorado; Florida; Indiana; Mass.; Nevada; No Carolina; No Dakota; Oregon; Rhode Island; Tennessee and W. Virginia.

You can take a fee in lieu of commissions in every state except for: Mass.; No Carolina, Tennessee and W. Virginia.

If you do take a fee, then you have disclosure requirements (most of the time in writing, however not in every state) to the client in every state except for: Alabama; Delaware; DC; Florida, Hawaii; Mass.; Mississippi, Rhode Island; So Dakota; Tennessee; W. Virginia and Wyoming.

All of this has to deal with fees and commissions relating to the "retail agent"

TheInsKid,

Is their a website that give information on fees as per the stuff you rattled off? Looking for some sort of resource that has this information.

I know there are also restrictions on the amounts of fees such as Florida where the max is $35.

I do not know of any one website that has all of this kind of data in one place and in one document. The closest that I have seen is CIAB. We are a member of the CIAB (Council of Ins. Agents & Brokers) and they have a very nice quality service for this kind of stuff (they charge you for it, of course and I believe you have to be a member)
A lot of the data has come by way of reviewing specific state insurance websites and insurance code for the various states since I am licensed in the 50. By the way, our state review and conversation with the Big I of Florida shows that the state does not allow a retail agent to have any amount of fees. You can pass on a wholesaler's fee but I believe it is limited to $35.

Thanks, For all the replies this is helpfull information.

I'm in CA too Apollo. Currently, there are broker fee regulations that the DOI implemented several years ago in negotation with the American Agents Alliance. They say they apply mainly to personal lines but it is prudent to follow them even for commercial lines. Also its the right thing to do.

I personally would not call it an agency fee. Why? Because of the difference in definition between broker and agent AND because the DOI takes issue with an agent charging a fee vs a broker charging a fee (agent represents the carrier, broker represents the customer).

Personally, I break out the fees that are charged (lumped together) and then in a separate broker/customer agreement disclose our fee.

I've been doing this a long time and have not had any customers take issue with the fee. If they ask, I'm straight forward and they usually respect that.

Recently, The DOI under Garamendi was trying to make it difficult (almost impossible) for even a broker to charge a fee, however the Agents Alliance is currently on the issue and is looking into dealing with it legislatively if the DOI continues under its new commissioner.

Of course all of the above is a moot point if you are not licensed as a broker. If your license just says "agent" and not "agent/broker" then technically you cannot charge a fee.

If state insurance regulations address fees they usually are for retail transactions and as re admitted carriers.

In CA it is my understanding that if you are an agent for an admitted carrier and receiving commission from them, you cannot charge a broker/agency/goodguy, etc. fee unless you advise the insured upfront before binding what that fee is and why you are charging it. You should get a sign off letter to that effect anytime you place yourself in that situation. Disclosure is always a paramount issue.

MGA's [that is Managing General Agents who have quoting & binding authority thereby meeting usual agency requirements] have been admonished about charging broker fees when they quote/bind coverage in one of their admitted carriers. So, they get around it by charging policy fees, MGA fees, etc. When they quote/bind coverage in one of their nonadmitted carriers fees are not an issue. Many MGA's also issue policies, endorsements, etc. and the expense of those activities substantially erode their retained commission share, thus their fees usually supplement that expense as their income.

Surplus Lines Brokers [aka Wholesalers] who place business for retail agents may charge fees irrespective of whether their placements are with admitted or nonadmitted carriers. They get their income by retaining [usually] 1/3 of the total item commission and adding a service fee which they call a broker fee. If their placement has a low total commission, say 10%, and their retail client wants it all, then their broker fee will be pretty stiff. If your surplus lines broker's fees bother you, then discuss them with him/her. The bottom line is that you know the fees before presenting the quote to your client and thereby they are disclosed. End of story.

The broker fee which I am going to pay is $250.

We charge BF, depending on the size of the premium and we always disclose this fee on the proposal