Abolishing contingency commissions and making them illegal would be a mistake, John Oxendine, Georgia Insurance Commissioner, told more than 800 agents attending the 109th Annual Convention, Trade Show and Young Agents Conference in Amelia Island, Fla. from June 7 to 10.
Oxendine described a meeting he attended in New York at which representatives of several large insurance companies complained they had been put at a competitive disadvantage by agreeing not to take contingency commissions.
According to Oxendine, they wanted all contingency commissions abolished in all states. They claimed that, due to their agreement, their companies were at a disadvantage to smaller agencies around the country.
“I looked at them and asked, are you serious?” Oxendine said. “You are telling me that you are at a disadvantage and you can’t compete with a mom-and-pop general agency on Main Street, America?”
Oxendine told them they were “literally crazy,” and to get out of the room. He said there is no way that in my state, and in the states of a majority of my colleagues that are going to outlaw contingency commissions.
Insurance Counselor vs. agent
The commissioner explained the requirements to be licensed in Georgia as an Insurance Counselor, and defined the difference. He said to obtain an Insurance Counselor’s license at present an agent must prove five years of appropriate experience, and indicated that new requirements will accept five years of experience in other fields.
He said it is important to know the difference between an agent’s license and a counselor’s license. He pointed out an agent can only accept a fee from a carrier they are writing a policy for, and can never take a fee from their client.
“If an agent takes a fee, they can get in trouble, don’t do it,” Oxendine said. He said a counselor can take a fee from a client, but only in certain circumstances.
‘You can be a counselor and an agent and be the same person and get a fee from the commission—but you can not take a fee for the same service you are getting a commission for,” the commissioner explained. “You get paid a commission for placing business. As a counselor, you can take a fee for placing business if there is no commission, or you can take a fee for something other than placing business if you get a commission, but you can not do both, which is double-dipping.”
Oxendine said counselors can legitimately charge fees for commercial or general risk assessments, a workplace safety analysis, estate planning or tax planning. He said that the life or general risk area involve fees and counselors can legitimately charge fees for these services.
“You are charging for your expertise, your planning, to help meet customers needs and get their costs lower,” he explained.
Oxendine cautioned that because an agent quotes a fee up front to do this service the client has the right to assume they own you.
“I paid you, you work 100 percent for me, and no one else,” Oxendine said. “Under the law as an agent you are representing the coverage and an agent for the coverage. I know you all think of yourself as agents for the consumer, but realistically, if I felt like my agent was not looking out for me, I would fire him in a heartbeat and look for someone else.”
Under Georgia law, Oxendine advised the agents, you have to stop and say, “OK, now I am going to offer you some products I sell, I am going to be paid a commission by the company.” He said a counselor ha to tell them how much they are going to be paid and obtain their consent. He even suggested it was a good idea to get that consent in writing.
“They have to authorize you to leave your capacity as a counselor representing them and acknowledge that you are representing the company and obtaining a commission,” Dale explained. “That is the only time in Georgia that an agent is required by law to disclose how much they are being paid in commission, and I very strongly think that is the only time.
“As a matter of fact, there is an issue now with Zurich in which they will address this issue,” he continued. “Zurich has said they are going to make all agents everywhere disclose how much they are getting paid and how much their commission is in every transaction. I think that is inappropriate and not really necessary. Other people do not always disclose their commissions.
“You have an obligation in general when your client asks, ‘How much are you getting paid?'” Oxendyne said. “You can either tell him or you can say, ‘It’s none of your business.’ If you tell them it’s none of their business, they will probably fire you and get someone else.
“If they do ask you and you tell them, you have an obligation to be honest and tell them the truth. You can get in trouble for lying to them but you don’t have to tell them.”
Oxendine concluded by saying he has no intention of changing the rules in Georgia.
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