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This article is reproduced with permission from the Insurance Agents and Brokers of PA. You must belong to the IA&B in order to access the linked documents referenced in this article.

Broker = Representative of the consumer (when acting without a carrier's appointment)

Whenever you are placing a risk with a carrier that has not appointed you (i.e. you are acting as a broker), you are required to secure a written agreement with the client. Examples include placements with SWIF, Fair Plan, MGA or Surplus Lines market, etc. The penalty for failing to secure the written agreement is $5,000 per violation (that is for each insurance placement in your book that is missing the agreement).

The agreement must:

• delineate the services that your agency will provide; and
• provide full and complete disclosure of all fees that the consumer will be paying
• be signed by the client prior to representing or acting on their behalf.

 
WARNING: The agreement is required even if you do not charge fees.

To assist your agency in complying with this requirement, IA&B has created a sample Brokerage Agreement which could be used as a base, and while acceptable, should be modified to meet your agency's needs and the individual client circumstances that may arise.

Other considerations:

• The delineation of services that your agency provides can be as specific or as broad as you choose. You should begin by constructing a list of services that you provide in all situations—the value-added services of your agency.
• For more information on charging fees, click here.
• Once an agreement is developed it may be used consistently from client to client but can also vary. As an example, you may choose to have a specific agreement for clients you place with SWIF where you charge a fee; for the rest of your brokered business, you might decide to have a different agreement where you don't charge a fee. Whatever the case, you should apply your policy and procedure in a nondiscriminatory fashion.
• Click here for more information on your role as representative of the consumer.
  

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This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents and Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.

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May 5, 2008