Fees are also changing. How can you use forms to communicate fees to your customers? How do insurance brokerage disclosure forms work and what do you need to know to continue following best practices? As an insurance-knowledgeable retail producer, what would you expect for brokerage fees and other expense reports if you were the insurance buyer? Do what you want them to do for you, and you`ll probably be free at home. Retailers bear the main burden of disclosing fees and other charges, as they are directly related to the insurance purchaser. In November 2019, the FCA published guidelines for insurance manufacturers and distributors in general insurance distribution chains to clarify their expectations of companies in the general insurance and protection sector following changes to the DLI in product supervision, governance and broker compensation. Remuneration is broad and includes “revenue from commissions, profit-benefit agreements, royalties and any other economic or non-economic benefit generated by the distribution of an insurance product”. Among the remunerations that could conflict with the client`s best interest rule is remuneration that encourages the company to offer a product that does not meet the client`s requirements and needs, or where the remuneration is not proportionate to the cost of the benefits and services offered by the broker to the client. This covers incentives and fees collected directly by the customer. When a broker takes out insurance, he is generally presumed to be acting as an agent of the potential insured, his relationship being based on agency law and a fiduciary duty between the broker and the insured. As an intermediary, the broker must act in good faith at all times, which he considers to be the interests of the insured. The broker must account for any secret profit he makes and must not place himself in a position where their interests and duties are contrary.
An insurance brokerage fee disclosure form makes brokerage fees transparent to your clients. It describes some of the legal obligations a broker has to clients. For example, the AmericanAgent Alliance states that the IDD aims to promote the overall objective of promoting a level playing field in the distribution of insurance and reinsurance in EU Member States. It is also about ensuring that consumers enjoy an adequate level of protection, regardless of the distribution channel through which they have purchased an insurance product, and create a level playing field and competition between insurance intermediaries. In addition, brokerage fees may be subject to certain limitations of state insurance regulations. For example, Florida limits retail brokerage fees to 35 $US, whether licensed or not. In the excess line market, some states, such as Minnesota, treat brokerage fees as an excess line premium and subject those fees to premium tax for excess lines. (The authors believe that the retailer has entered into a “brokerage fee agreement” with the insurance purchaser, which fully discloses all fees for all services, in accordance with the “brokerage fee agreements” discussed in two previous Insurance Journal articles dealing with discounts.) According to the rules of the IDD, the broker must communicate to the insured the nature and basis of the remuneration – that is, it is a fee paid by the insured – in good time before the conclusion of the initial insurance contract and, if necessary, when it is amended or renewed (ICOBS 4.3.-7R).
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