At least once a week, someone in the education department at FAIA gets a question something like this:

"Is it ok for an agency to charge a fee for insurance?"

Most of the time, the answer to that question is "NO."

Usually the person asking doesn't like that answer because they want, for one reason or another, to charge more than their commission on an account.

So, we've compiled a list of FAQs for you - that's frequently asked questions - on our website in the education library. This list addresses everything we know about the subject of how, when and why an insurance agent is allowed to charge a fee. Note that there are differences in the rules for admitted vs. non-admitted markets, and these are also addressed.

Most of this information you've seen before, either in The Florida Underwriting Guide - Miscellaneous section, or in the class titled "The Compensation Equation: Can consulting fees be added to your future?" or in the Agents' Confidential Vol. XXIV, Bulletin 38, July 1994. But now we've got it all in one place for you, with references! Of course, this shouldn't be construed as legal advice (we leave that to the attorneys). But it will serve as a guide for you to decide if you want to pursue this potential revenue source.

Please note that you can lose your license if you don't apply these rules to the application of fees (per our coversationns with the DFS referencing Drew v. Insurance Commissioner case).
FAQ's for FEES

1Q. Can an agent charge a fee for selling insurance?

1A. NO

2Q. Why not?

2A. We asked the Department of Insurance legal section, and they said "NO" - and quoted several FL Statutes.

FS627.403 and 626.932(6): Premium defined.

To paraphrase, these sections of the statutes say that the entire amount of the charge made for an insurance policy may not exceed the premium amount. Other statutes regulate the filing of such premiums by the carriers. Any added fees wouldn't be made a part of the premium that is filed, which means you can't add them on.

FS626.9541 - Unfair methods of competition and unfair or deceptive acts or practices defined.

Paraphrasing: You can't charge more or less than the filed premium, and the whole consideration paid for insurance must be on the policy, even if it is E&S.

Note that E&S carriers are permitted a few fees; see Agent's Ed bulletin 18, May 2002:
DFS http://www.fslso.com/docspubs/press/bulletin-2002-001.pdf and select bulletin ID number 02-001.

Also, Surplus Lines Agents can charge a $35 policy fee, see FS626.916(4), and MGAs are permitted a fee, see FS626.7451(11).


3Q. What can we charge for?

3A. A. That depends on what services you provide. You can't charge for anything related to selling the insurance policy, since the premium is supposed to include that.

Examples of prohibited charges:

Application fees, photo fees, replacing ID cards, certificates of insurance fees, binder fees, phone or fax fees, or any usual and standard part of the process of placing insurance coverage.

B. However, helping the insured do the following things might be considered examples of what services are above & beyond what is needed to place insurance, and therefore permitted (see Q4 regarding contracts):

1. Monitoring payroll audits

2. Establishing loss control procedures

3. Assisting in forecast and funding of self insured programs

4. Designing insurance specifications (for them to use in getting quotes from other agents)

5. Prepare loss analysis reports

6. Auto inspection fee of $5 is allowed, see FS627.744(4).

7. If you're selling PIP/PD only, you may charge a $10 fee, see FS627.7295(5a).

8. You may ask the client to reimburse you for your actual cost to run MVRs, see FS627.7295(5)(B).

4Q. If I do items 1-5 listed in 3. B., how do I properly charge the fees?

4A. You absolutely must have a separate contract with the insured, stating exactly what services you will perform for what charges. This is for your own protection, so there can be no misunderstanding about combining fees with premiums for insurance. The contract must be executed prior to the services being performed, and the specified services identified in the contract must be service not normally provided by an agent in handling insurance transactions. Be sure to have an attorney look over your plan and your contract.

Items 6, 7 and 8 are specifically permitted by statute so a separate contract isn't needed.


5Q. If they buy a policy from me, can I waive my fee for doing all that work?

5A. NO. FS626.572 is clear that rebating is not allowed in most cases.

You also cannot waive your commission in favor of a fee unless you are in full compliance with that same rebating law, which is detailed in terms of the steps you have to take to comply. Review FS626.572 carefully before you enter into this tangled area. Also check FS626.9541(1)(h).

6Q. What if I set up an entirely separate corporation?

6A. It's the separate contract with your client that keeps you out of trouble with DFS, not the separate entity.

7Q. But my E&S carriers are issuing all my policies "net of commission" and tell me to charge whatever I want for commission. What do I do about that?

7 A. Usually this isn't permitted; see Agent's Ed bulletin 18, May 2002, which references the DFS bulletin: http://www.fslso.com/docspubs/press/bulletin-2002-001.pdf

Your commission should be a part of the premium charged the client. If the E&S company causes you to have to add a fee to be compensated for your work placing insurance, they are causing you to violate the concept that is clearly stated in FS626.9541 (see 2). The full consideration for a policy "by whatever name called" must be shown on the policy, even if it is E&S.

8Q. If I start doing extra services in order to bring new revenue into my agency, according to the proper rules set by the DFS, will those activities be covered under my E&O policy?

8A. You'll need to check with your carrier; it depends on exactly what services you decide to offer.

One final note: you can view all of the statutes listed in this article at www.leg.state.fl.us. Just use the search engine to find the statutes. The links in the article are live, too, so you should be able to just point and click there as well. If you choose the "printer friendly" version of this article, all the statutes referenced will print for you, in the order mentioned.

9Q. What about charging back credit card fees to the client?

9A. We checked with the DFS and learned that a general lines agent can charge a fee for credit card services, according to FS626.9541(1)(o)2. They said this: "We looked very carefully at the statute and are confident the typical general lines agent/agency can charge a fee for credit card services. The statute is below. Note the word "or" and how it separates the surplus lines agent thought process from the other "licensed agents." If the statute were meant to apply just to surplus lines agents there would be no need to mention other "licensed agents" in the lower part of the statute quoted."

[Editor's Note: For competitive reasons, we don't recommend agents do this. It's a value added service to the client, and most companies do not charge back the fee to the client.]

10Q. How about Life and Health insurance or group policy fees?

10A. We asked the DFS this question, and got this answer:Concerning charging a fee for the sale of group health plans, in 2004 year a law was passed (626.593) which allows an agent to charge a fee as agreed upon pursuant to a contract for actually selling the plan. The agent must rebate his commission to the client within 30 days of receipt. This was passed to address the low commissions being paid in this market. For more information on L&H fees, though, we recommend you contact the Florida Association Insurance and Financial Advisors, www.faifa.org.

Relevant Sections Of Referenced Statutes Regarding Fees:

627.403 "Premium" defined.--"Premium" is the consideration for insurance, by whatever name called. Any "assessment," or any "membership," "policy," "survey," "inspection," "service" or similar fee or charge in consideration for an insurance contract is deemed part of the premium.

626.932(6)

(6) For the purposes of this section, the term "premium" means the consideration for insurance by whatever name called and includes any assessment, or any membership, policy, survey, inspection, service, or similar fee or charge in consideration for an insurance contract, which items are deemed to be a part of the premium. The per-policy fee authorized by s. 626.916(4) is specifically included within the meaning of the term "premium." However, the service fee imposed pursuant to s. 626.9325 is excluded from the meaning of the term "premium."

626.9541(1)

(h) Unlawful rebates.--

1. Except as otherwise expressly provided by law, or in an applicable filing with the department, knowingly:

a. Permitting, or offering to make, or making, any contract or agreement as to such contract other than as plainly expressed in the insurance contract issued thereon;

b. Paying, allowing, or giving, or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance contract, any unlawful rebate of premiums payable on the contract, any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract;

626.916(4)

(4) A reasonable per-policy fee, not to exceed $35, may be charged by the filing surplus lines agent for each policy certified for export.

626.451(11)

11) A licensed managing general agent, when placing business with an insurer under this code, may charge a per-policy fee not to exceed $25. In no instance shall the aggregate of per-policy fees for a placement of business authorized under this section, when combined with any other per-policy fee charged by the insurer, result in per-policy fees which exceed the aggregate amount of $25. The per-policy fee shall be a component of the insurer's rate filing and shall be fully earned.

627.744(4)

(4) The inspection required by this section shall be provided by the insurer or by a person or organization authorized by the insurer. The applicant may be required to pay the cost of the inspection, not to exceed $5. The inspection shall be recorded on a form prescribed by the department, and the form or a copy shall be retained by the insurer with its policy records for the insured. The insurer shall provide a copy of the form to the insured upon request. Any inspection fee paid directly by the applicant may not be considered part of the premium. However, an insurer that provides the inspection at no cost to the applicant may include the expense of the inspection within a rate filing.

627.7295(5) (a)

(5)(a) A licensed general lines agent may charge a per-policy fee not to exceed $10 to cover the administrative costs of the agent associated with selling the motor vehicle insurance policy if the policy covers only personal injury protection coverage as provided by s. 627.736 and property damage liability coverage as provided by s. 627.7275 and if no other insurance is sold or issued in conjunction with or collateral to the policy. The per-policy fee must be a component of the insurer's rate filing and may not be charged by an agent unless the fee is included in the filing. The fee is not considered part of the premium except for purposes of the department's review of expense factors in a filing made pursuant to s. 627.062.

627.7295 (5)(b)

(b) To the extent that a licensed general agent's cost of obtaining motor vehicle reports on applicants for motor vehicle insurance is not otherwise compensated, the agent may, in addition to any other fees authorized by law, charge an applicant for motor vehicle insurance a reasonable, nonrefundable fee to reimburse the agent the actual cost of obtaining the report for each licensed driver when the motor vehicle report is obtained by the agent simultaneously with the preparation of the application for use in the calculation of premium or in the proper placement of the risk. The amount of the fee may not exceed the agent's actual cost in obtaining the report, which is not otherwise compensated. Actual cost is the cost of obtaining the report on an individual driver basis when so obtained or the pro rata cost per driver when the report is obtained on more than one driver; however, in no case may actual cost include subscription or access fees associated with obtaining motor vehicle reports on-line through any electronic transmissions program.

626.572 Rebating; when allowed.--

(1) No agent shall rebate any portion of his or her commission except as follows:

(a) The rebate shall be available to all insureds in the same actuarial class.

(b) The rebate shall be in accordance with a rebating schedule filed by the agent with the insurer issuing the policy to which the rebate applies.

(c) The rebating schedule shall be uniformly applied in that all insureds that purchase the same policy through the agent for the same amount of insurance receive the same percentage rebate.

(d) Rebates shall not be given to an insured with respect to a policy purchased from an insurer that prohibits its agents from rebating commissions.

(e) The rebate schedule is prominently displayed in public view in the agent's place of doing business and a copy is available to insureds on request at no charge.

(f) The age, sex, place of residence, race, nationality, ethnic origin, marital status, or occupation of the insured or location of the risk is not utilized in determining the percentage of the rebate or whether a rebate is available.

(2) The agent shall maintain a copy of all rebate schedules for the most recent 5 years and their effective dates.

(3) No rebate shall be withheld or limited in amount based on factors, which are unfairly discriminatory.

(4) No rebate shall be given which is not reflected on the rebate schedule.

(5) No rebate shall be refused or granted based upon the purchase or failure of the insured or applicant to purchase collateral business.

626.9541(1)(h)

(h) Unlawful rebates.--

1. Except as otherwise expressly provided by law, or in an applicable filing with the department, knowingly:

a. Permitting, or offering to make, or making, any contract or agreement as to such contract other than as plainly expressed in the insurance contract issued thereon;

b. Paying, allowing, or giving, or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance contract, any unlawful rebate of premiums payable on the contract, any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract;

c. Giving, selling, or purchasing, or offering to give, sell, or purchase, as inducement to such insurance contract or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the insurance contract.

626.9541(1)(o)2

2. Knowingly collecting as a premium or charge for insurance any sum in excess of or less than the premium or charge applicable to such insurance, in accordance with the applicable classifications and rates as filed with and approved by the department, and as specified in the policy; or, in cases when classifications, premiums, or rates are not required by this code to be so filed and approved, premiums and charges in excess of or less than those specified in the policy and as fixed by the insurer. This provision shall not be deemed to prohibit the charging and collection, by surplus lines agents licensed under part VIII of this chapter, of the amount of applicable state and federal taxes, or fees as authorized by s. 626.916(4), in addition to the premium required by the insurer or the charging and collection, by licensed agents, of the exact amount of any discount or other such fee charged by a credit card facility in connection with the use of a credit card, as authorized by subparagraph (q)3., in addition to the premium required by the insurer.