For What Services Can An Insured Be Charged A Fee?

Judging by the telephone calls and e-mails that I have received from my clients and others since the beginning of this year, a New Year’s resolution made by many insurance agents has been to explore ways in which fees can be charged to their customers.  I have had requests to review fee agreements for customers that are related to both personal and commercial lines of insurance.  There is a specific statutory scheme that regulates the type of fees that can be charged to a commercial lines customer in connection with the placement of a line or subline of insurance, if the agent also wants to receive a commission from the insurance company for that placement.  For the reason explained below, this statutory scheme leads to the conclusion that personal lines customers can not be charged fees for services related to the placement of their insurance policies if the agent also wants to receive a commission from the insurance company for that placement.  But what about fees for services that are not related to the placement of those policies?

With respect to this question, there is only informal guidance from the Insurance Commissioner’s Office that the Unfair Practices section of the Georgia Insurance Code that prohibits charging anything more or less than the stated premium “for insurance” covers any activity that is considered to be an integral part of the placing and servicing of an insurance policy.  As noted in an earlier post on this blog, the Insurance Commissioner considers the issuance of a certificate of insurance to be an integral part of the placing and servicing of an insurance policy.  Thus, a fee can not be charged by an insurance agent for the time it takes to issue such a certificate.  However, my earlier blog post makes the argument that an agent who also has a counselor’s license can charge a fee for performing that service, if he or she follows the requirements imposed by the Insurance Code on the charging of a fee and the receipt of a commission for the placement of commercial lines policies.

In general, an agent who also has a counselor’s license can receive a fee from the insured for providing “additional ancillary services for commercial risks in excess of acquisition services” if those services “are disclosed in writing to the insured and approved in advance by the insured.”  In 2005, the Georgia legislature imposed additional disclosure requirements that apply to the initial purchase of an insurance coverage in connection with which the agent will also be charging a fee.  (Click here to read an article I wrote that explains those requirements.)

Agents who handle personal lines of insurance cannot receive a commission and charge fees for “additional ancillary services” on the same line or subline of insurance even if they also had a counselor’s license, because the statute only permits such fees for “commercial risks.”  Personal lines agents are left with trying to determine what services they provide may not be considered an integral part of the placing and servicing of an insurance policy.  Any such services could be the subject of a fee charged by the agent.  One example I have used in the past is the charging of a fee for accepting and processing installment premium payments after the first such payment where the customer could make those subsequent payments directly to the insurance company.  It is also possible for a personal lines agent, as well as a commercial lines agent, who has a counselor’s license to be paid only a fee by the customer for the placement of insurance. (Click here to read an article I wrote on that subject.)

To protect themselves, in all situations in which an agent charges a fee of any kind to the customer, the agent should disclose the fee and obtain the customer’s consent to its payment in writing.