Until January 1, 2002, the Alabama Trade Practices Law prohibited agents from collecting any charge for insurance other than as specified in the policy and in accordance with the rating filed with the Insurance Commissioner by the insurer. An insurance broker, who may also be licensed as an insurance agent, is permitted to be compensated directly by the consumer for the broker’s services in placing the consumer’s insurance, but when acting as a broker the broker cannot share in the placing agent’s commission.
Beginning January 1, 2002, the new Producer Licensing Law merges the licenses of agents and brokers into a new license called an insurance producer license. As such, insurance producers will be permitted to charge a fee to consumers for their services as an insurance producer, but not in violation of the Trade Practices Law as mentioned above. There was also a change to the Trade Practices Law, effective January 1, 2002, which will nevertheless permit producers to charge and collect certain administrative fees as approved by the Commissioner of Insurance for the processing of property and casualty insurance applications.
Thus, pursuant to the authority set forth in Section 27-12-17, Code of Alabama 1975, effective January 1, 2002, insurance producers may collect administrative fees not in excess of the following schedule when processing applications for property and casualty insurance:
- Any one of the following:
- New application: $25
- Rewrite canceled or lapsed application: $25
- Reinstatement fee: $10
- Plus any and all of the following as applicable:
- Home re-inspection: $25
- Photo of Auto or Home: $5
- Cash payments received in agency: $5
- Motor Vehicle Reports: Actual Cost
These administrative fees are separate and distinct from the insurance company’s premium and must be disclosed to consumers as a separate charge by the producer.
Other than as set forth in this bulletin or as may be hereafter approved by the Commissioner, producers will be considered to act in violation of the Trade Practices Law (Section 27-12-17) for charging an additional fee for services that are customarily associated with the solicitation, negotiation or servicing of insurance policies.
It should be noted that certain producers may also engage in the practice of providing financial planning advice. To avoid potential confusion in this area, it is recommended that insurance producers providing financial planning advice first enter into a written agreement with the consumer disclosing that he or she is also a licensed insurance producer and that if an insurance product is purchased from the producer a commission for the sale of an insurance product will be received in addition to a fee for financial planning, if this is the case.
It is recommend that no producer engaged in personal financial planning charge fees for financial planning other than commissions unless the fees are based upon a written agreement, signed by the party to be charged in advance of the performance of the services under the agreement. A copy of the agreement should be provided to the party to be charged at the time the agreement is signed by the party. The services for which the fee is to be charged should be specifically stated in the agreement. The amount of the fee to be charged or how it will be determined or calculated should be specifically stated in the agreement. The agreement should also state that the client is under no obligation to purchase any insurance product through the insurance producer. Producers following this recommendation should retain a copy of the agreement for at least three (3) years after completion of services.