Excessive Charges By Agents

WEST VIRGINIA INFORMATIONAL LETTER

INSURANCE COMMISSIONER

No. 6

October, 1971

EXCESSIVE CHARGES BY AGENTS

It has come to the attention of the West Virginia Insurance Department that a

number of agents are charging excessive consideration or "fees," variously described as

"administrative," "clerical," "servicing," or "placement" fees, or by other designations, in

connection with insurance transactions.

The West Virginia Code, Chapter 33, Article 1, Section 17 (1931, as amended),

defines "Premium" as the consideration for insurance, by whatever name called. By the

terms of this definition any and all charges made by an agent in the taking of an

application, the issuance of a policy, and any service rendered in connection therewith,

are "premiums."

The administrative and clerical expenses attending the production of insurance

and its servicing are normally considered by the insurer as an includable factor in

calculating the appropriate premium to be charged for a policy of insurance.

The commissions paid an agent by the insurer he represents are deemed to

constitute the entire compensation due him in connection with the solicitation,

negotiation, making, procuring, or servicing of a policy of insurance.

It is, therefore, the position of this department that the charging by an agent of any

extra consideration or fee, such as the above-enumerated, to defray expenses customarily

allocated to and included in the policy premium, amounts to an overcharge of premium

and constitutes an unfair discrimination against any insured so charged.

Any agent found to be making such charges, inasmuch as they are deemed to be

unfairly discriminatory, is engaging in an unfair trade practice, and will be subject to the

appropriate penalties of law governing that activity.

Samuel H. Weese

Insurance Commissioner