Broker Fee Question

[harold]

Just want to clarify that I did a search on this and wasnt able to find any answers to my questions.

I know broker fees are different in each state, so this applies to CA P&C personal lines. If anyone can help me get some clarification, it would be greatly appreciated.

Heres the situation, a relative of mine has his own brokerage, who I now work for. He has appointments with several carriers and has signed me up over the years. Today I looked in rgsafe at my old fscrater pdf's and found out I was being charged broker fees of several hundred dollars for a an auto policy with a premium of $800. I also found another document that showed I was charged another BF of several hundred dollars to change a vehicle to an existing policy that only cost about 20.

Being that it is family, and having no knowledge of the insurance industry at the time, I trusted him and thought I wasnt paying more than $100 for a broker fee each time I signed. BTW, broker fees were never disclosed, and papers that showed my premium were missing when I did sign, so all I would see was my coverage and the areas I needed to sign.

Im pretty frustrated about it, but I realize the money is gone. The thing thats really bothering me is I dont know whether or not its ethical to do so. And since Im working for the guy, Im not trying to pick up on bad habits.

I need to keep this anonymous, but if anybody would be willing to break down how broker fees work, whether or not what happened was legit, and whether or not I should associate myself with this business.

The most awful thing about it is that I have a feeling that alot of people have been taken advantage of and Im having a hard time thinking that I'll be making money in a way that isnt ethical.

I hope Ive given enough info, I need to keep this anonymous since it is family, I just dont know what to do and dont want to confront the guy until I have an understanding of what is considered fair. Ive been to the CA DOI website and looked at the laws regarding broker fees, and it just didnt add up to what happened, but I feel like I might not have understood it correctly. It boils down to trust, and I dont want to work with someone I cant trust.

Thanks guys.

 

[Todd Payne]

Someone has some 'splainin to do.

Sounds like he took advantage of you. Nothing like trusting a family member. Broker fee of a few hundred dollars? On a policy with an $800 premium? And to top it off another broker fee of a few hundred just to endorse a policy? Seems awfully shady to me. Especially if the fee was not disclosed. If a fee is to be charged, there is supposed to be a disclosure form. I wonder if he charged all his clients the same broker fee.

You might want to investigate further. I know you don't want to rock the boat because it's family and you work for the guy, but I would not want to work with someone whom I distrust. Just my 2 cents.

 

[djs]

In California, broker fees are legal, but are usually around $25 to $50 if applied at all. They used to be pretty prevelant, but I don't see them much anymore on personal lines policies (except perhaps non-standard).

Are you sure you are reading this correctly? Is it a bad case of something being on the wrong line? A few hundred dollars here and there would price you out of the market pretty quickly. I understand he may have hidden this, but usually broker fees are paid upfront, so they do get noticed!!!!

Dan

 

[b61mack]

if you don't trust the agency, find another job! how are you pricing policies?

 

[JHPrime]

DOI states that you must sign a standard disclosure fee if you are being charged a fee.

If an agent is going go gouge their clients, he better have this document in every account he has. DOI don't like brokers that don't disclose these fees.

$200 is quite excessive for personal lines policies IMO.

 

[harold]

Thanks for your feedback guys.

I feel like Im learning this business all wrong. The problem is that I dont know what I dont know.

DJs, what happened with me was that I was told it will be 25% of my total premium upfront since I decided to go monthly, and my rate would be such and such, which is how Ive seen it go down with several other people. Before I started learning anything about insurance, I didnt question this, I used to just write the check for what I thought was the premium. Now I realize in most cases all a person has to pay is the first month of their premium of their policy and theyre set, not some 25% upfront BS, which is how I think the broker fee is paid without knowing so.

I haven been into work since I posted this, just contemplating on how to approach the situation and what to do next.

The worst part is that I invested a decent amount of money upfront to start an occupational registration renewal (DMV) program with him as well as the idea of starting up a few other (non insurance related) services in the office.

I really dont want to get into more detail since I'd like to remain anonymous, but if anyone would like to help me out, maybe talk over the phone, it would be worth a lot to me.

Thanks.

 

[Hefe]

Broker fees are fairly uncommon but not unheard of. I have had a few calls from clients "about to purchase" a Unitrin or Commerce West policy from another agent that included a $200-300 broker fee. Obviously that's an easy sell when I tell them I'll sell the same policy without a fee.

I wish I could camp outside the doors of these agencies and just poach clients all day.

As for your situation, it's tricky because it's family. Could you say that you were casually looking through your old policies to see how rates have changed / learn more / got curious? Then ask if you should be charging broker fees and if you need to disclose them. Tell him you remember something in the license prep material about disclosing them.

The hardest part is that you can't trust him and don't know if he's teaching you the ethical and legal way to do business. If you can't get over these, you might as well cut your losses and go elsewhere.

 

[DiegoInsGuy]

I wouldn't say that broker fees are rare. Some of the largest substandard auto carriers in CA are renowned for broker fees, it's how they make there living. You know the ones...$15 a month for auto insurance.. they charge in some cases 300-500 dollar broker fees. People are becoming aware of this more and more, and of course there target market are the DUI and/or crazy driving record folks, young drivers. Just my 2cents.

If I write home insurance in surplus lines it's getting a broker fee. But I disclose it every time.

 

[Bertolinoins]

Not defending your family member but often these agencies have fixed fees built into their ratings systems. If he didn't do it himself and passed you off to somebody else they could have just rated you without taking the standard broker fee off. There is a section in the FSC rater where you automatically add in broker fees and all quotes include it. I suspect this is a non standard auto shop with registration services. If so... the broker fee could be built into their rating system unless the person remembers to override it.

 

[harold]

Not defending your family member but often these agencies have fixed fees built into their ratings systems. If he didn't do it himself and passed you off to somebody else they could have just rated you without taking the standard broker fee off. There is a section in the FSC rater where you automatically add in broker fees and all quotes include it. I suspect this is a non standard auto shop with registration services. If so... the broker fee could be built into their rating system unless the person remembers to override it.

Auto shop? The renewal registration deal is the same thing they do at AAA. The guy is an independent agent who does all personal lines and commercial except for life and health. I understand how the standard broker fee works in the rater, but why would it be left on close to $500 (which is an odd number anyways), especially since they do a lot of business with auto and home? But does that mean if you use FSC rater and bridge it to a company you have an appointment with, is collecting a broker fee for that still illegal?

Hats off to you guys who dont give insurance a bad rap. I think Im out at this point though.