South Dakota Provides Guidance on Insurance Producer/Consultant Rules

The South Dakota Division of Insurance has provided guidelines on rebating, fees and commissions for licensed producers acting as consultants in the state.

Prohibited for Producers

• Rebating.
• Negotiating commissions with consumers under any circumstances. This includes writing policies “net of commission.”
• Charging any fee not specified in the insurance product. The exception is a consulting fee.
• Collecting a consulting fee and commission on the same product with the sameconsumer. This also applies to surplus lines brokers.

Permitted for Producers

• For large group health and exempt commercial products, producers may negotiate commissions and premiums with the insurance company.
• For large group health and exempt commercial products, producers may negotiate premiums with consumers.
• Collecting only a commission on a product.
• Collecting only a consultant fee on a product.
• Collecting a consulting fee on one distinct product, and then collecting a commission on a dissimilar product with the same consumer.

Required of Producers

• When an insurance product is sold, the producer must charge the full amount of the premium, which includes any commissions or fees specified in the policy.
• Consultant fees are not subject to premium tax.
• Any other fees are subject to premium tax.
• Sales tax may apply to consultant services.