TN Insurance Bulletin (1983-10-27): Agent Fees and Commissions

JOHN C. NEFF

COMMISSIONER

STATE OF TENNESSEE

DEPARTMENT OF COMMERCE AND INSURANCE

114 STATE OFFICE BLDG.

NASHVILLE 37219

8 U L L E T I N

TO:

ALL INSURANCE COMPANIES

COMMISSIONER f·

FROM:

JOHN C. NEFF,

RE:

FEES

DATE:

OCTOBER 27, 1983

The Department of Commerce and Insurance has received a great

many inquiries in the past several months regarding the issue of

fees versus commission.

This bulletin is to inform all insurance

companies doing business in Tennessee of the Department•s position

regarding the companies• responsibilities on this issue.

This

Department considers any money paid for a specific policy of

insurance by the consumer to be a part of the gross premium.

There-

fore, any arrangement between an agent, company, and policyholder

which allows for a fee to be charged rather than or in addition

to a commission would not relieve he company involved for payment

of premium taxes on the amount paid by the policyholder.

If one

of your company•s agents is charging such fees, and the Department

receives proof of this charge, your company will be billed for the

premium taxes plus interest and penalties.

The Department also sees a problem with such an arrangement

for property and casualty insurers who could be in violation of

Tennessee Code Annotated, Section 56-5-305 and Section 56-5-306,

which requires that agents and companies follow the rates which

have been filed with the Depar;tment.

Further, depending on whether

or not fees or commissions wefe reduced for a specific client, there

is a potential violation of t.C.A., Section 56-8-104 (6) and (7)

for all lines of insurance.

Therefore, if a fee or reduction of

commission is made on a specific policy of insurance, there are

several possible violations for which this Department could charge

both the agent and/or company involved.

JCN:ct