Before the age of specialization, insurance agents tried to provide their customers with a broad range of insurance products. Sometimes the client would request a bid for insurance in an area that the agent was not to familiar with. If he was mainly an auto insurance agent, and his customer wanted a bid on his commercial property with liability coverage and glass coverage, the agent would have to do some pretty extensive research. He would contact various companies and ask about their products and try to find a package suitable for his client. Many times this would take hours of research. If the client bought the package, the agent could add a fee to help offset the time spent on research. To do this, he needed only to have a broker's license. Up until recently, that meant only answering a few more questions on his licensing exam. Needless to say, plenty of agents opted to get the broker license.

As with all good things in our society, it didn't take long to find a few rotten apples in the barrel. Over the years, the barrel seemed to get more polluted. Agents found ways to "slip" the fee through and not clearly define it and show it. Both actions are required by the Department of Insurance. Agents started to see how much they could get as a fee without using a set fee schedule. In plane english that means that if the agent thought the client was naive enough, he would stick him with as high a fee he thought he could get away with! To fully understand the depth of that, it becomes vital that you understand who gets the fee and what happens to it after you pay it.

Broker fees are "FULLY EARNED". In simple words that means that the second you pay it, the agent gets to keep 100% of it. If you cancel the next day, tough! The agent does not have to give back a dime of it. To add a little insult to injury, ponder this. The agent earned that by looking in his rate book (the same one he's been sticking his nose into everyday for a couple of years) and doing "research". The worst example of this abuse I have seen involved a young man who paid a $100 fee to buy an $80 liability policy. The agent was boasting about this conquest in between half hearted statements about his providing a service for the customer.

There is the argument that the use of broker's fees can be warranted. Should an agent choose to set an amount that is "fair and reasonable" to all his customers and provide a service for that fee, then there may be justification for it. If an agent is charging you a fee, you may want to ask why, or what are you receiving for that fee. More times than not, the use the fee is WIN-LOSE-LOSE proposition. The following will show how.

Suppose a policy is rated for $200. The agent adds a fee of $25, $30, or $50. You, as the retail consumer, get to overpay for your goods by 12.5%, 15%, or 25%. Even at the lower end, 12.5% is a hefty fee to add to anything. You lose in this situation. The insurance company still only gets the $200 (less commission paid to the agent). They lose because you have an impression that insurance is already 12.5% higher than it really is. The only winner is the agent. He gets paid twice!! Once by the company (his commission), and an extra $25 or more that you slipped him. He/she WINS, you LOSE, the insurance company LOSES. Under that arrangement, it's hard to believe that the agent is looking out for your best interest. One agent I talked to, who charges fees, said he just trying to find his customers the best deal he can. When I asked about his discriminate use of fees to some people but not to others, he laughed and repeated his statement about the best deal. The "research" he does for his customers to find this"best deal" is going through the same rate charts he has been sticking his nose into for the past several years! The prejudicial charging and waiving of fees could warn you about the agent you are about to chose. It may show you that the agent may not be the best person to have in your corner should you need help during a claim!

Broker's fees have been misused and misrepresented to a lot of people. They have been used in advertising in a manner that could be subject to action by the Department of Insurance. (Translated...loss of license...loss of income!!) However, most agents who use them are not even aware of the proper conduct mandated by the Department of Insurance. It shows that the only concern the agent has is not the proper use of them, but the money it sticks in their pocket. The insurance companies don't like them and I am sure every consumer doesn't like them. It serves only one person, the agent. Why employ someone whose only goal is their own profit? Remember, no agent has a monopoly on the company he is offering. There are other agents out there who can offer the same policy for you without the broker fee! (I hear that old familiar line sneaking up...) Remember...the smart buyer is the educated buyer!!