1. Prior to the July 1 conversion to producer, only a broker could charge fees to a policyholder. Will the ability to charge fees change after July 1?

Yes. The conversion will move the current dual license system of agent/broker to the single license of producer. This will allow each licensed producer to operate as a broker would have operated under the old system. This includes being able to charge fees. (back to top)

2. What types of compensation is a producer allowed to receive?

Unless contrary to the agency-insurer agreement, a producer may receive a commission paid by the insurer, a fee paid by the insured, or a combination of commission paid by the insurer and a fee paid by the insured. Also, please keep in mind that a producer may ONLY receive a fee from an insured or in any other instance where it is specified in the policy; that is, included in the premium. (back to top)

3. Does the producer need to provide a statement to the OIC regarding if they will or will not be charging fees?

A new applicant for an insurance license will be asked to declare in what capacity they plan on doing business – in an agent capacity, in a broker capacity, or both. This can be done per the instructions on page two of the paper application or on the online application. An existing licensee will not have to declare what capacity in which they will be doing business but will need to meet the requirements of the law if acting in a broker capacity. There is no requirement to provide a statement to the OIC concerning the charging of fees. (back to top)

4. When is it permissible to receive a commission, service fee, or other valuable consideration?

This is where it is important to note the definitions of sell, solicit, and negotiate as stated in the law. An insurer or a producer shall not pay, nor shall any person accept, any commission, service fee, or valuable consideration for selling, soliciting, or negotiating insurance if that person is required to be licensed and is not. (back to top)

5. If the producer is going to charge fees or place business with a company to which they are not appointed, are there requirements other than being licensed that need to be met?

Yes, the producer will need to have a bond in place for placing business with a company to which they are not appointed and will be required to furnish the required written compensation disclosure to the insured where the producer deals directly with the insured and charges the insured a fee. (back to top)

6. Is the bond required to be in place before the producer license will be issued?

No, the bond is no longer a pre-requisite to issuance of the producer license. However it must be obtained PRIOR to placing business. (back to top)

7. Does the producer need to file the bond with the OIC?

No, the bond will no longer be required to be sent to the OIC. The producer will need to keep it in their records and be able to make it available in the case of an audit by the OIC. (back to top)

8. What is the required amount of the bond?

The required bond amount is $2,500 or 5% of the premium brokered in the previous calendar year, whichever is greater. The maximum amount required is $100,000. (back to top)

9. Does each producer need to purchase an individual bond?

If the producer is affiliated with a business entity, the business entity may carry the bond for the producer. If the producer belongs to an association, the association may carry the bond for the members of the association. If neither of the above applies, the producer must purchase an individual bond. (back to top)

10. What criteria does the association need to meet to be able to offer a bond?

The association must have been in existence for 5 years, have common membership, and have been formed for a purpose other than obtaining a bond. (back to top)

11. Will the OIC provide the disclosure statement?

No, the OIC will not provide the disclosure statement. Each producer or business entity will need to create their own statement, which must meet the content established by the law. (back to top)

12. What format or content needs to be included in the disclosure statement?

While there is no specific format, the disclosure must be in writing and, for each policy, include the following information:

the full amount of the fee to be paid by the insured;
the full amount of any commission paid to the producer by the insurer, if one is to be received;
an explanation of any offset or reimbursement of fees or commissions; and
when the producer may receive additional commission, that states:

the producer may receive additional commission in the form of future incentive compensation from the insurer, including contingent commissions and other awards/bonuses;
the producer will furnish the insured or prospective insured with specific information relating to the additional commission upon request; and
the full name of the insurer that may pay any commission to the producer. (back to top)

13. If the producer is charging the insured a fee AND is paid a commission by the insurer, is the producer allowed to reimburse a part or all of the fee charged?

While it is not the policy of the OIC to establish business practices for licensees, the offsetting or reimbursement of a portion or all of the fee charged with the commission is permitted (if not encouraged). (back to top)

14. Is the producer allowed to receive incentive compensation, such as contingent commissions?

Yes and, for each policy, the required written disclosure to the insured of the compensation must be made where the producer is dealing directly with the insured and charges the insured a fee. (back to top)

15. When does the written disclosure need to be completed?

Written disclosure is required to be provided to the insured PRIOR to the sale of the policy and must be signed by BOTH the producer and insured. (back to top)

16. How long must the disclosure statement be kept on file?

The disclosure must be kept on file by the producer for 5 years. (back to top)

17. There are certain circumstances where the producer may not be face-to-face with the insured. What rules for the disclosure form govern this situation?

For example, when the purchase is made over the telephone or by electronic means for which written consent cannot be reasonably obtained, consent may be documented by sending the disclosure statement to the insured within 10 days after the purchase. (back to top)

Questions?

Phone: 360-725-7144
Email: Licinfo@oic.wa.go

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New producer rules - frequently asked questions

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Producer Licensing | Lines of Authority | New Licensees |

Compensation and Disclosure | Miscellaneous

Compensation and Disclosure

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