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Senerio:
1099 producer has contract with agency for 50/50 split for new business and 60/40 split for renewals. (40 TO AGENT)

Agency/csr's create additional premium endorsement for commercial auto policy...additional premium is not paid by insured nor collected by agency...at renewal insured refuses to pay a/p and finds another agent/agency for renewal. Agency charges 1099 producer for uncollected premium. This issue is not addressed in 1099 producer agreement signed when coming to work for agency.

WHAT IS YOUR OPINION ?

K95ROCK2035 wrote:Senerio:
1099 producer has contract with agency for 50/50 split for new business and 60/40 split for renewals. (40 TO AGENT)

Agency/csr's create additional premium endorsement for commercial auto policy...additional premium is not paid by insured nor collected by agency...at renewal insured refuses to pay a/p and finds another agent/agency for renewal. Agency charges 1099 producer for uncollected premium. This issue is not addressed in 1099 producer agreement signed when coming to work for agency.

WHAT IS YOUR OPINION ?

If you were not paid a commission on the uncollected premium, then what are they "charging back"?

I have seen this happen too often by a variety of large and small Agencies. Usually the contract between 1099 independent contractor and Agency include a provision that the Agency will not be held responsible for un-collected premiums however they are earned or billed (including audit). In the 1980s, when contractors couldn't pay their work comp audits, I saw many contractor dependent agencies forced to merge with larger agencies just to survive "" the 1099 agents were charged back 100% of the earned premium, which forced them to simply quit and go to work for someone else. Producer agreements have become more specific since then and few allow the 1099 agent to walk away from uncollected premium. Of course, uncollected premiums that are turned back to insurers within 30-60 days of invoice usually become the insurer's responsibility to collect and the agency's only loss is all related commission, which they often charge back in full to the 1099 agent. 1099 Agents are like small businesses responsible for tracking expenses, income and collections. 1099 Agents should be able to demand monthly income statements and over 30 day premium due alerts from their Agency. If the Agency fails to warn them, or provide such information at all, the 1099 agent may have cause for action against the Agency. If Agency does provide such information, the 1099 agent is stuck with the loss 90% of the time. One last remark, it is true that as a consultant I usually see the relationships that are already in trouble, but of those I can not remember the last time the 1099 agent passed the Agency/Producer Agreement by his/her own legal counsel "" and I have never seen one that used an attorney competent in insurance related matters.

Rob, they are being charged back the a/p that was advanced to the carrier.

Payment specifics should be addressed in all agent contracts, as well as licensing, E&O, etc. so everyone knows who is responsible for what. Sounds like an inadequate contract was in place.

By either practice or office rules, who is responsible for collection of the additonal premium in your office? Were you made aware of the outstanding amount or are these things handled only by a CSR? I can't tell you what to do here but I can tell you how my 1099 producers deal with this.

For whatever reason account generates A/P: bill is sent out to client with 10 day due date - copy of billing is faxed to producer (mine all work from their homes) and an 11 day follow up is set. If no money has been received or financing has not been arranged on the 11th day a second request billing is sent with a 5 day due date - billing states that cancellation will be requested if not received by 3PM on the due date. On the due date, producer is called & given one last chance to collect before day end. If still unpaid, cancellation is requested and any additonal premium due company is paid from cancellation return premium. I never hold my produers liable for uncollected funds because they have to collect them within the 15 day window. Of course all bets are off if we're within 30 days of renewal - client is billed in advance of the endorsement being requested. My Underwriters are very aware of this and will give me a verbal quote for the A/P.

For the most part unless you are responsible for collection of premium (by that I mean, that you are in the billing / cancellation loop) I find it to be very unprofessional for the agency to charge you back for the uncollected premium (commission if paid - yes). This is why we as owners have collection agencies and that ever growing entry in our accounting system called Bad Debt / Uncollected Premiums that we write off every year.