CCR - Broker Fee Regulations

California Code of Regulations
Title 10. Chapter 5
Subchapter 1, Article 6.8. Broker Fee Regulations

Table of Contents

Section 2189.1 Applicability

Section 2189.2 Definitions

Section 2189.3 Broker Fee Requirements

Section 2189.4 Disclosure and Agreement

Section 2189.5 Unfair and Deceptive Acts and Practices

Section 2189.6 Discipline

Section 2189.7 Severability

Section 2189.8 Effective Date

Appendix A - Standard Broker Fee Disclosure

Appendix B - Standard Broker Fee Agreement

Section 2189.1 Applicability

1. The provisions of this article apply to all transactions and services performed by fire and casualty broker-agents acting in the capacity of an insurance broker for applicants, policyholders, or other consumers of an insurance coverage described in Insurance Code sections 660 or 675.
2. Subdivisions 2189.3(a), (d), (e) and (g), 2189.4, and 2189.5(a), (b), (c), and (f) of this article shall not apply to a wholesale intermediary who in the particular transaction did not negotiate directly with the consumer, provided that the wholesale intermediary discloses its fees in writing to the retail broker-agent.

Authority cited: California Insurance Code Section 790.10.

Reference: California Insurance Code Sections 790, 790.01, 790.02 and 790.03(b).

Section 2189.2 Definitions

1. "Broker fee" means and includes any fee, however labeled, charged by an insurance broker, as defined in Insurance Code sections 33 and 1623, to provide services that constitute or arise out of the transaction of insurance, as defined in sections 35 of the Insurance Code, but excludes fees charged for services not constituting or arising out of the transaction of insurance.
2. "Consumer" means an applicant or purchaser of personal insurance coverage described in Insurance Code sections 660 or 675.
3. "Retail broker-agent" means a broker-agent that negotiates an insurance contract directly with a consumer.
4. "Wholesale intermediary" means a broker-agent that negotiates an insurance contract with a retail broker-agent, but not with a consumer.

Authority cited: California Insurance Code Section 790.10

Reference: California Insurance Code Sections 790, 790.01, 790.02 and 790.03(b).

Section 2189.3 Broker Fee Requirements

A broker-agent acting in the capacity of a broker may charge a broker fee, provided that:

1. The consumer agrees to the fee in advance of the agreement required by subdivision 2189.3(e), after full disclosure of all material facts surrounding the fee, including if true the fact that an insurer may pay to the broker a commission in addition to the broker fee.
2. The fee is not being charged directly or indirectly for services related to procuring coverage from the California Automobile Assigned Risk Plan or the California FAIR Plan, and is not prohibited by statute or regulation.
3. The broker is not an appointed agent of the insurer with which the coverage is or will be placed.
4. The broker provides the consumer with the Standard Broker Fee Disclosure set forth as Appendix A to this Article
5. The consumer and broker sign a broker fee agreement that includes at minimum, and does not conflict with, the Standard Broker Fee Agreement set forth as Appendix B to this Article.
6. The broker has an in-force broker bond on file with the Department as required by Insurance Code sections 1662, 1663, and 1665.
7. The broker discloses, concurrent with the conveyance of an initial premium quotation, the fact that a broker fee may be charged.

Authority cited: California Insurance Code Section 790.10

Reference: California Insurance Code Sections 790, 790.01, 790.02, 790.03(b) and 790.06.

Section 2189.4 Disclosure and Agreement

The disclosure and agreement required by subdivisions 2189.3(d) and (e) shall be printed in English and in any other language principally used by the broker to advertise, solicit or negotiate the sale and purchase of insurance. The disclosure and agreement, signed or initialed by the consumer, shall be retained by a broker for eighteen months following the latest expiration of any policy to which the disclosure and agreement apply.

Authority cited: California Insurance Code Section 790.10.

Reference: California Insurance Code Sections 790, 790.01, 790.02 and 790.03(b).

Section 2189.5 Unfair and Deceptive Acts and Practices

The following acts shall be deemed unfair or deceptive when committed by a broker who has charged or will charge a broker fee:

1. Failing to provide the consumer with the Standard Broker Fee Disclosure required by subdivision 2189.3(d).
2. Failing to complete all relevant portions of the broker fee agreement required by subdivision 2189.3(e) before giving the agreement to the consumer for review.
3. Failing to provide to a consumer a fully completed copy of the broker fee agreement required by subdivision 2189.3(e), signed by both the consumer and the broker, as soon as reasonably practicable.
4. Failing promptly to refund an entire broker fee if the broker acted incompetently or dishonestly resulting in financial loss to the consumer, or if the broker did any of the following regardless of financial loss:
   1. Negligently or intentionally misquoted the premium to the consumer, resulting in an uprate.
   2. Permitted an unlicensed employee to transact insurance for, or on behalf of, the consumer paying the fee, where the Insurance Code required that employee to be licensed.
   3. Failed to refund unearned premium as required by Insurance Code section 393(a), except where permitted by Insurance Code sections 393(b) or 1735.5.
   4. Negligently or intentionally failed to place the consumer's coverage within the time period indicated to the consumer or within a timely manner.
   5. Negligently or intentionally failed to remit a consumer's premium payment to an insurer or general agent, resulting in policy cancellation.
   6. Failed to disclose the existence of the insurer's periodic payment plan, if one was available.
   7. Failed to refund unearned commission in the broker's possession to the person to whom it is owed within 30 days of the unearned commission being generated due to amendment or cessation of coverage.
   8. Failed to remit or apply to another policy premium finance company credit owed to the consumer/borrower within 15 days or receiving the credit from the premium finance company.
5. Failing to place a consumer with an insurer with which the broker is appointed as an agent, solely for the purpose of charging a broker fee.
6. Charging or attempting to charge a broker fee for a renewal, endorsement, or other service, that was not disclosed under section 6 of the Standard Broker Fee Agreement.

Authority cited: California Insurance Code Section 790.10.

Reference: California Insurance Code Sections 790, 790.01, 790.02, 790.03(b) and 790.06

Section 2189.6 Discipline

1. The failure to comply with any subdivision of this article by a fire and casualty broker-agent shall constitute a violation of Insurance Code section 1668(j), and shall be grounds to suspend or revoke a license pursuant to Insurance Code section 1738 et seq.
2. Nothing contained within this article shall be deemed to limit the Commissioner's authority to impose disciplinary sanctions authorized by statute or regulation for conduct or nonfeasance by a broker not specifically addressed in this article.

Authority cited: California Insurance Code 790.10

Reference: California Insurance Code Sections 790, 790.08 and 790.09.

Section 2189.7 Severability

If any provision of this article is invalidated by a court with proper jurisdiction, the remaining provisions shall continue in effect.

Authority cited: California Insurance Code 790.10

Reference: California Insurance Code Sections 790, 790.01, 790.02, 790.03(b), 790.06, 790.08 and 790.09.

Section 2189.8 Effective Date:

This Article shall become effective on November 23, 2000.

Authority cited: California Insurance Code 790.10

Reference: California Insurance Code Section 790, 790.01, 790.02, 790.03(b), 790.08 and 790.09.

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Last Revised - April 16, 2001