Massachusetts Allows Insurance Producers to Charge Fees When Selling Policies
October 22, 2013 by Thomas Harman, associate editor, BestWeek
BOSTON – Resident and nonresident insurance producers in Massachusetts can charge separate, additional fees to customers when selling them policies, according to a new bulletin by the state Department of Insurance.
The October bulletin was issued as a guidance for insurance producers. “Resident and nonresident insurance producers, including special insurance brokers, engaged in the solicitation, negotiation and sale of insurance in the Commonwealth may charge the purchaser of an insurance product a fee in addition to the policy premium established by the insurance company,” the bulletin said.
But the bulletin puts conditions on doing so. The purpose and amount of the fee must be made known in writing to buyers at the time of sale; the fee cannot be included as part of the policy premium, as established by the insurer issuing the policy; and the fee must be separately itemized on the policy declarations page, the billing statement or other documentation, the bulletin said.
The bulletin is seen as good news to the Massachusetts Association of Insurance Agents as an opportunity for additional revenue, said Daniel Foley, MAIA’s vice president of government affairs. He said the bulletin applies to all insurance lines and to surplus brokers.
Prior to the bulletin being issued, the Department of Insurance’s position had been that any commissions agents received were included as part of an insurer’s annual rate filings and that any additional fees in addition to commissions generally were not allowed. The only exception to that rule was in cases where rate filings did not include commissions for certain products and then a “reasonable fee” was charged, Foley said.
The DOI wrote the bulletin without any prompting from the insurance industry and to further efforts at cost-containment and transparency, said DOI spokeswoman Jayda Leder-Louis. State statutes are silent about whether fees can be charged in addition to commissions. “We wanted to give producers some sort of guideline as to what they would be allowed to do,” she said.
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)
