Mass. DOI Says Producers May Charge Fees

Massachusetts regulators last month issued a bulletin announcing that producers for all lines of insurance may charge their clients fees in connection with the sale of insurance products. A statewide independent agent association said the bulletin represents a big change for agents and brokers.

Bulletin 2013-09 says resident and non-resident insurance producers, including special insurance brokers, engaged in the solicitation, negotiation and sale of insurance in Massachusetts may charge the purchaser of an insurance product a fee in addition to the policy premium established by the insurance company, provided that:

• The purpose and amount of the fee shall be disclosed, in writing, to the purchaser prior to the time of sale;
• The fee shall not be included in the policy premium, as established by the insurance company issuing the policy; and
• The fee shall be separately itemized on the policy declarations page, billing statement, or other documentation provided to the purchaser setting forth the policy cost.

The Massachusetts Division of Insurance (DOI) spokesperson Jayda Leder-Luis told Insurance Journal that the division issued the bulletin to clarify allowable fees to be charged by insurance producers in Massachusetts.

“Massachusetts statute is silent on the question of whether producer fees are allowed,” Leder-Luis noted.

“Bulletin 2013-09 clarifies that fees may be charged by producers so long as they are disclosed in advance, are separately listed, and are not subsumed into the premium being charged for the product,” she said.

Daniel J. Foley, Jr., general counsel for the Massachusetts Association of Insurance Agents, said the bulletin represents “a huge difference from past administrations.”

He said that even though Massachusetts statutes are silent on whether producer fees are allowed, “in prior administrations, the Division of Insurance has always said that if agents or brokers sell a particular insurance product and receive compensation by means of a commission, that was the only way they were going to be compensated no matter how small a commission it might be,” Foley said.

“This bulletin does represent a huge change that now allows all producers, including licensed property/casualty, health, excess and surplus lines brokers, to charge an additional fee on top of receiving the commission, provided they, prior to the sale of the policy, put down the purpose and the amount of the fee which has to be disclosed in writing,” Foley said.