by John Darer CLU ChFC CSSC RSP
Some settlement consulting firms offer ancillary services that extend beyond the sale of annuities or other insurance products and charge a fee for those services. Where discounts may be offered to members of associations, large groups or individuals such settlement consulting companies need to be aware of Circular Letter No. 9 (2009) which was issued by the New York State Insurance Department and deals expressly with such matters.
From personal observation a large number of settlement consultants, structured settlement brokers and settlement planners conduct business in New York with life agent licenses. Life agent licenses begin with the letters "LA" followed by a sequence of numbers. What they may not be aware of is that life agents may not charge fees. Only life brokers can charge fees. A life broker license commences with the letters "LB" followed by a sequence of numbers.
However, the department states that the fees charged should be reasonable, and like insureds (or potential insureds) should be charged the same amounts for the same services. Is this happening in practice?
Here is an excerpt from the Circular Letter No. 9
"Of course, under the Insurance Law, an insurance broker, but not an insurance agent, may charge an insured a service fee for providing insurance-related services, provided that the broker obtains a written service fee agreement in accordance with Insurance Law § 2119(c). Further, both an insurance broker and an insurance agent may, in accordance with Insurance Law § 2119(a) and (b), charge a fee for insurance consulting services pursuant to a written consulting agreement. However, the fees charged should be reasonable, and like insureds (or potential insureds) should be charged the same amounts for the same services. See Circular Letter No. 9 (2006) (discussing service fee agreements)."
Permissible services of insurance agents and brokers; rebating and inducements New York State Insurance Department March 3, 2009