Ca Broker Fee

[Ken]

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~

[meytai]

Ken

Charge what you feel is appropriate

[Ken]

ya, it appears to be fairly subjective.
Thanks!

[mccluney]

Wow. In CA if you are acting as an "agent", you may not charge a broker fee. If you are acting as a "broker" for personal lines there is an approved broker fee form that can be downloaded from the Department of Insurance website.

A broker fee form is required for personal lines, but not commercial.

In lieu of the flap over broker fees, agent associations had strongly advised using a broker fee form for commercial lines. Full disclosure to the client of fees charged may result in less regulation of insurance products and add creditabilty to the services we agent/brokers provide to our clients.

[SME]

I would suggest a note of caution.... CA is pretty strict when it comes to fees. See Bulletin 80-6 which clearly states, "BROKERS WHO ARE APPOINTED AGENTS ARE ACTING AS AGENTS OF COMPANIES WHICH HAVE APPOINTED THEM". Therefore you may not charge fees. This is not a personal / commercial lines issue – this is a California Insurance Code issue – see Section 1731.

Taking it one step further, each carrier must make a filing in order for you to charge fees, if you have an appointment. No agent/company may charge fees which have not been approved by the CA DOI. If you have an appointment ~ no carrier will allow you to charge anything that has not been pre-approved by the DOI.

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.

Oh, did I mention there may be premium tax implications?

I recommend you stick with your commission or seek out legal council with a deep understanding of CA DOI code and market conduct results.

Good Luck!

[Ken]

Thanks All
As i said previously, I'm aware that my appointments dont allow for Broker Fees, I was never planning on charging them in those scenarios. But when I place something into a surplus line, as an example, I can.
So, the question I pose is this: When it is LEGAL and MORAL to charge a Broker Fee in California, how do you come to a fair amount? What is common?

[DarrenR]

The CA DOI website states that the broker fee regulations apply only to personal lines.

[mccluney]

I thought my post was clear.

I said in CA if you are acting as an "agent", you may not charge a broker fee.

Acting as a "broker" when I charge fees, I have the client sign a disclosure form. The form is not required for commerical lines yet. I have been advised not to charge a flat fee or % fee, by an agents' association attorney. The CA Insurance Dept. regulations are not specific has to the amount of fees that can be charged. The attorney suggested that an objective criteria be used in each case. So, as SME suggests a word of caution should be used.

[simiinsuranceguy]

It does not seem that anyone is willing or able to give a bit of guidence regarding your original question "what is fair?" We normally add whatever BF is needed to get our total compensation (commission and BF) to 15%. For instance, if I have a $1,000 premium, getting 10% commission, I would then charge a $50 BF, for a combined compensation of $150, or 15%. I hope this helps with your question.

[ffisher]

Broker Fee regulations in California are governed by ins Code Sec,(s) 790.10 790, 790.01, 790.02 and 790.03(b) . Also more specifically, the Calif Code of regulations has an entire section on this at Section 2189.1. These sections may be found at the CDI website. Please Consult with your attorney for more information. Rest assured they MUST be disclosed at all times and certain forms may be required to obtain the Insured's signature. You may NOT charge a Broker Fee if an Insurance Co. has filed an Action Notice with the CDI appointing you as an appointed agent.
Feel free call me or email me at ffisher@e-o.com or 310-322-1301

Fred Fisher CEO
ELM Insurance Brokers

[jack1978]

As long as there is full disclosure and the fee is reasonable, there is no reason not to charge a BF.

[RKunz2]

Good catch simiinsuranceguy!

I've struggled with these same questions myself. This is actually the first time I've seen someone mention the Broker Fee Disclosure form...was beginning to think I was the only one that either used it and/or knew about it. Can't tell you how many broker-agents I've talked to that have no idea it even exists, or about the insured signature requirement for personal lines insurance. I've always taken a stance that an instructor taught me early on, "If in doubt, disclose!" Transactions should be transparent and it's when they're not that we (as an industry) get ourselves into trouble. Most people in business understand fee-for-service and profit margins. It's when you (anyone) tries to hide it that suspicions are raised and people get understandably sketchy.

By the way, I like the 15% rule-of-thumb, thank you. It's fair, not overzealous, and certainly within the realm of "reasonable profit." I think we all try to help people as much as possible, in this economy in particular, but customers need to understand the work (before, during, after) that goes into writing and servicing a policy properly.

Good stuff everyone! Best wishes.

[CSP]

We don't charge a broker fee, except when the wholesaler does not pay us a commission. Charge a broker fee and we will under bid you with the same company every time by 10% to 15% if you are charging a broker fee if that is what you are charging (as noted above). If you are charging a broker fee in addition to being paid a commission, your just greedy...................

[simiinsuranceguy]

To CSP. You are funny! If you receive no commission and charge a 15% BF, or whether you earn 15% commission with no BF, our quoted premium is the same. Not sure how that is greedy, but if you say it is, then it must be true!
PS. I still think that you are funny!

[RKunz2]

Some clarity might be in order. I took it (and I think that was the way it was meant) as a total of 15% compensation (either commission, broker fee, or a combination of the two) that totals 15%. If you take 10-15% commission and then add another 10-15% broker in addition to; then perhaps you might be a bit greedy, or maybe you're simply charging market pricing. Who knows?

In either case, the broker fees are becoming fewer and further between in this market and economy. In certain states (like Arizona), the insurance code will not allow for broker fee, even on brokered business, where the market is contracted, even if that contract is with the MGA and not the retail broker.

For what it's worth, I agree, CSP is funny - BUT, you've got to have a healthy sense of humor in this business, right? Beat our markets? Not likely. Not unless you take everything (fees and commissions) down to 0% and do it for free (which I won't lie, I've seen it happen).

Hey, I just keep hoping for the day when we're out of this market/economy and none of this will be anything more than a memory (until the next soft cycle). Good hunting everyone!