Broker Fees: The Ticket to Wealth or An Invitation to the Commissioner’s Office?

Jun 19, 2020

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For the last twenty years or so, I’ve been hanging around the water coolers of some fantastic trade groups for agency owners.   These could be agent organizations, marketing companies who bring like-minded agents together, continuing ed classes, or even some of the great online principal forums that exist today.

One topic that always comes up is FEES.  How much to charge?  Is it legal in my state?  (Are you sure?) Can I charge for certificates and payments? (If I do, do I need a new fee acknowledgment form?)  I’m an agent of Sinking Sands Mutual; am I allowed to charge fees?   How much do you charge?  And of course the braggarts, usually from one coast or the other, who can’t wait to rub it in how much they charged on some hard-to-place EPLI for Hollywood’s latest movie-star-gone-afoul

The first bit of advice I would give you is make sure that if you are going to charge fees, you do it in full compliance of the law of the state(s) the risk is in.  If you’re not sure, contact the state’s regulatory arm for insurance agents and brokers and ask.  They would much rather have you do that, than charge fees illegally or improperly. Regulators are not likely to be sympathetic toward producers who charge fees in a manner non-compliant with the law.  National Underwriter publishes a book each year that lists current licensing and fee regulations for each state.

If you work exclusively for one carrier, such as “captive agent carriers”, in addition to making sure that you can legally charge fees, you should also make sure that the practice has the blessing of your carrier.

The laws vary from state-to-state.  Some states have a set schedule of what you can charge and the reasons for doing so.  Other states don’t allow fees at all.  Other states, such as New York, will allow a broker (who represents the insured) to charge a fee, but an agent (who represents a carrier) may not. It is also a requirement that the insured sign an acknowledgment of any fee he has paid, which is likely to be the case in most states.  If you sell both property & casualty as well as life products, make sure that you check state laws to see if the regulations vary between the products.

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