Selecting a Broker-Agent
Choosing a qualified, professional insurance agent can be as important as choosing your doctor, your accountant, or any other professional upon which you rely.  If you are selecting an agent or broker for the first time, your best resources are your relatives, neighbors, co-workers, as well as professional broker-agent associations.

When selecting a Broker-Agent, you may wish to verify the producer’s licensing status with the Department.  You can check a producer’s license on the Department’s Web site www.insurance.ca.gov, or you can reach the Department at the contact information given under the "Talk to Us" section at the end of this brochure.

The Producer Licensing Bureau of California Department  of Insurance is responsible for issuing insurance licenses and administrating continuing education requirements for producers.  As of January 1, 1997, all agents and brokers are required to include the Department of Insurance issued license number on business cards, premium quotations, and printed advertisement. This will enable you to check on their license with our Department.

The following are excellent questions to ask your relatives, neighbors, or co-workers about their producer when selecting someone to protect you, your family, and your assets from a potential financial loss:

• Have they had a recent claim?
• How did the producer and/or the insurer respond to the claim?
• Has the producer been courteous and prompt in responding to their questions and changes to their policies?
• Did the producer take the time to fully explain the terms and conditions of their policies?
• Does the producer periodically contact them to update coverages?
• It is critical that you choose a producer with whom you feel comfortable.   You need to be able to have an open exchange about the coverages and services that are available, so you can determine what best fits your needs.  It is not the responsibility of the Broker-Agent to determine either the type or amount of coverage you need, so good communication is the key.

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Useful Tips

Read all documents completely before you sign and date them.

• Never sign blank forms to avoid misunderstandings and possible fraud.
• Ask the Broker-Agent to explain any wording you think is ambiguous.
• Obtain copies of the documents relating to your insurance transaction, such as:
  -Application
  - Binder
  -Receipt
  -Broker Fee Agreement
  -Premium Finance Agreement
  
• Make certain the application and/or the binder reflects the limits and deductibles, coverage purchased, name of the insurance company, effective and expiration dates, and automobile or residential property covered.
• Be truthful in your replies to questions asked, as they may be verified. Omitted or inaccurate answers can cause delays, denial, and/or recision of coverage.
• Don’t ask the producer to break the rules as you both could be prosecuted for fraud. Insurance fraud is a felony in California.

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Summary of Broker Fee Regulations
In order to charge a broker fee, a broker must meet the following requirements:

• The consumer agrees to the fee in advance, after full disclosure.
• The fee is not being charged on a CAARP, FAIR Plan, or Low Cost Auto program.
• The broker is not an appointed agent of the insurer with which the coverage is or will be placed.
• The broker provides the consumer with a specific disclosure form.
• The consumer and broker sign a Broker Fee Agreement containing certain standard information.
• The broker has an in-force broker bond on file with the Department.
• The broker discloses the existence of the broker fee at the time of the initial premium quote.

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Stop!

• Do not sign any Broker Fee Agreement unless all of the blanks have been filled in completely.
• The broker fee is not set by law and may be negotiable between you and the broker.
• Broker fees are non-refundable, even if you cancel your coverage.  You may be entitled to a full refund of the broker fee if the broker acted incompetently or dishonestly.
• You are entitled to obtain a copy of the Broker Fee Agreement.
• You must receive a copy of a premium finance disclosure and agreement if your premiums are being financed.  You should ask the producer if the insurer offers its own installment payment plan, as they are often less expensive than premium financing through a premium finance company.
• Effective November 23, 2000, your producer must provide you with a copy of the current Department of Insurance pamphlet "Automobile Insurance" when placing automobile coverage and the "Residential Insurance" pamphlet when placing residential coverage.

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Glossary of Terms
Agent - A licensed individual or organization authorized to sell insurance for an insurance company.

Ambiguous - Terms or words that are unclear or uncertain; being open to more than one interpretation.

Binder - A short-term agreement put in effect by an agent to provide temporary insurance until the policy is written or delivered.

Broker - A licensed individual or organization who transacts insurance on your behalf.

Broker-Agent - A licensed individual who can act as an agent representing one or more insurers and also as a broker dealing with one or more insurers representing your interests.

Broker Fee - Any fee charged by an insurance broker to provide services that arise out of the transaction of insurance.

Broker Fee Agreement - The document which establishes the legal relationship between you and the broker, and the services that will be rendered by the broker.  The broker is required to keep this document for eighteen months after policy expiration date.

CAARP - Stands for the California Automobile Assigned Risk Plan.  This plan is available when the public is unable to purchase private passenger or commercial liability auto coverage because of a poor driving record.

Commission - That portion of the premium paid to the agent by the insurer as compensation for his/her services.

Coverage - The protection extended under an insurance policy.

Deductible - The amount of the loss that the policyholder is responsible to pay up-front before benefits from the insurance company are payable.

FAIR Plan - Established in 1968 to make basic fire insurance available to property owners in selected geographic areas of the state.  Created for those who have had problems obtaining fire insurance in the normal insurance market.

Fraud - An intentionally deceptive act committed to obtain an unfair or unlawful advantage.  Usually involving monetary gain.

Insured - The person who purchases an insurance policy and is entitled to benefits in case of an accident or loss.

Insurer - The insurance company who issues the insurance policy and agrees to pay for losses and provide benefits.

License - An authorization issued by the Department of Insurance to a Broker-Agent to conduct insurance business.

Low Cost Auto - A pilot program for the residents of Los Angeles and San Francisco Counties only, who meet specific lower income requirements.

Personal Lines - This term is used to refer to insurance for individuals and families, such as private passenger automobile and homeowner policies.

Policy - A contract that states the rights and duties of the insurance company and the insured.

Premium - The price of insurance paid to the insurance company for a policy.

Producer - A term used by the insurance industry to encompass agents and brokers.

Producer - A term used by the insurance industry to encompass agents and brokers.

Producer Licensing Bureau - A division within the Department of Insurance that regulates licensing of insurance producers.

Quotation - An estimate of the cost of insurance, based on information supplied to the insurance agent, broker, or the insurance company by the applicant.

Recision - The cancellation of a policy back to its effective date resulting in a return of all premium charged.

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