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How Do Insurance Broker Fee Disclosure Forms Work?

As an insurance agency, you juggle paperwork every day. Insurance agents require a lot of documents to continue running successfully. 

However, many of these forms shift over time, requiring you to edit forms to ensure that you're on top of the current best practices and changes. 

Fees change as well. How can you use forms to communicate fees to your clients? How do insurance broker fee disclosure forms work, and what do you need to know to continue to follow best practices? 

What Is an Insurance Broker Fee Disclosure Form? 

An insurance broker fee disclosure form makes broker fees policies transparent to your clients. It outlines some of the legal obligations that a broker has to clients. For instance, the American Agents Alliance form states that: 

  • The broker is entitled to charge a fee. 

  • Fees are not set by law and can sometimes be negotiable. 

  • Fees are non-refundable. 

  • Brokers may also receive commissions. 

  • The client is entitled to a financial disclosure form and agreement. 

Why Use Insurance Broker Fee Disclosure Forms? 

Why do insurance agents use fee disclosure forms? According to the Insurance Journal, at the California Department of Insurance, "the department regularly receives a high volume of customer complaints concerning the failure to disclose broker fees or excessive broker fees." 

Your clients like to know what they are paying. They also want to feel like they are getting good value. Fortunately, broker fee disclosure forms allow you to communicate fee guidelines and expectations with your clients so that they both understand the fees and can assess those fees for themselves. The Insurance Journal states that in order to achieve this goal, "the producer acting as a broker must simply use the appropriate forms, obtain the customer’s prior consent to the broker fee, and be transparent in the fee disclosure." 

Using fee disclosure forms also protects you as an insurance agent. For instance, if your clients can see in writing that you charge a fee, what it is, and that it is non-refundable, then if they request a refund from your agency, you can note that these specific fees are nonrefundable. Being clear about expectations protects your business and saves you from problems in the future.

Using Fee Disclosure Forms 

If you're charging a broker fee for personal insurance lines, you should use a standard broker fee agreement or create a custom form that uses language that synchronizes with that standard agreement. This clarifies expectations and covers your agency, reducing the number of complaints as clients become more aware of what you charge and what is and is not refundable. Make sure that your agreement is in English and in any other languages that you use to advertise and sell your insurance so that your clients fully understand your fees and practices. 

At American Agents Alliance, we help your independent insurance agency stay on top of your form development. We offer a resource bank of the best form templates to make your life as an insurance agent a little bit easier. Contact us today to learn more about our services and our networking opportunities. 

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