Oregon Producer Compensation Rules & guidelines (440-2590)

CONSUMER PROTECTION

Oregon Producer

Compensation

Rules & guidelines

Oregon law allows insurance producers to

charge fees (incidental charges or service fees)

to consumers only in limited circumstances.

This guide provides general information based

on Oregon Administrative Rules (OAR) 836-

071-0260 through 836-071-0277. Violations of

these rules may result in enforcement action,

including revocation of your producer and con-

sultant license.

The questions and answers that follow antici-

pate some typical issues that arise when an in-

surance producer charges a fee in one of those

circumstances. However, to avoid violations, re-

fer to the rules and laws cited in this guide.

Do the rules apply to all insurance producers, in-

cluding independent insurance producers, direct

writers, and captive producers?

Yes, all are subject to the rules to the same extent as

any other producers. This means that disclosure of

both fees and commissions is required. (ORS 744.093)

Does the disclosure requirement apply to

registered or licensed broker/dealers?

Yes, the disclosure requirements apply when a broker/

dealer is also licensed as an insurance producer or

insurance consultant and receives compensation

from the consumer under the insurance producer or

insurance consultant license. (OAR 836-071-0260,

836-071-0263, 836-071-0267 and 836-071-0277)

Are fees allowed on personal lines business?

Fees are only allowed on personal lines to the extent

permitted by OAR 836-071-0267 (outlined later in this

document). No other producer fees may be applied to

personal lines business.

Do the rules apply to insurance transactions in

the residual market?

Yes, there is no distinction between the residual mar-

ket (for individuals and businesses having diiculty

obtaining coverage) and the voluntary market.

Does a producer have to disclose fees when pro-

cessing a policy renewal?

Yes, a renewal is considered to be a purchase of

insurance.

At what point must a producer disclose fees to a

consumer?

Disclosure must be made before the placement of and

payment for insurance. (OAR 836-071-0260)

What requirement must be met in order to receive

compensation from a prospective insured?

Before the placement of and payment for insurance,

the producer must do all of the following:

a) Obtain the prospective insured’s documented

acknowledgement that the compensation will be

received by the insurance producer or ailiate.

b) Disclose the amount of compensation from the

insurer or other third party for the placement. If

the amount of compensation is not known at the

time of disclosure, the insurance producer must

disclose the specific method for calculating the

compensation and, if possible, a reasonable

estimate of the amount.

c) Disclose the nature of the work that the insurance

producer or ailiate will perform on behalf of the

prospective insured.

Can a producer charge a service fee for filing

proof-of-coverage certificates of liability

insurance with the Construction Contractors

Board (CCB)?

No. This service is a usual and customary service

provided by a producer. The incidental service fee for

issuing certificates applies only after the first 20 certifi-

cates in any one policy period. [OAR 836-071-0267 (11)]

When can a producer charge a service fee?

Except as authorized in ORS 744.091 and ORS 744.093,

a producer can charge a service fee only when the

service he or she is providing is in addition to what is

usual and customary practice of insurance producers

under similar circumstances. The disclosure of the

charge and the reason for it must be documented

before the placement of and payment for insurance.

Applicable Laws and Rules

744.053 — Requirements to be licensed as

insurance producer for class of insurance.

A person may not sell, solicit, or negotiate insurance

in this state for any class or classes of insurance

unless the person is licensed as an insurance

producer for that class or those classes in accordance

with ORS 744.052 to 744.089.

744.091 — Additional conditions under which per-

son licensed as insurer or insurance

producer may charge commission or service fee;

rules.

(1) An insurer or insurance producer may charge a

commission, a service fee, or a combination of the

two when transacting insurance in other than the

following categories of insurance:

(a) Insurance that covers an individual’s person,

property or liability;

(b) Life or health insurance for groups of fewer

than 51 lives; or

paying combined annual premiums of less than

$100,000 for the insurance.

(2) An insurer or insurance producer may charge a

commission or service fee other than the commis-

sion or fee filed in accordance with ORS 737.205

only if the insurer or insurance producer has a

written agreement with the prospective insured

prior to the binding or issuance of an insurance

policy. The Director of the Department of Con-

sumer and Business Services may establish by

rule minimum conditions for written agreements

entered into under this subsection. An insurer

or insurance producer who enters into a written

agreement as provided in this subsection is not in

violation of

ORS 746.035 or 746.045. [2003 c.364 §17b]

744.605 — Insurance consultant’s license

required.

(1) A person shall not act as an insurance consultant

unless the person holds a valid license issued by

the Director of the Department of Consumer and

Business Services that authorizes the person to act

as an insurance consultant. For purposes of this

section, a person acts as an insurance consultant

if:

(a) The person purports or oers to engage in any

of the activities described in paragraph (b) of

this subsection by using, in conjunction with

the person’s name, the title or designation

of insurance planner, consultant, adviser or

counselor, or financial and insurance planner,

consultant, adviser or counselor, or any similar

title or designation; or

(b) The person, for compensation other than

commission from the sale of insurance,

engages, attempts to engage, or oers to

engage in any of the following activities:

(A) Acting as a consultant regarding insurance.

(B) Giving advice, counsel, opinion, or service with

respect to the benefits, advantages, or

disadvantages of insurance that may be

issued in this state.

about insurance.

(2) For the purposes of subsection (1)(b) of this

section, compensation includes consideration

paid for financial and other related services

provided by the person in connection with

services referred to in subsection (1)(b) of this

section.

Fees and Disclosure;

Incidental Charges

OAR 836-071-0260 — Fees Charged by

Insurance Producers

When an insurance producer or any ailiate of the

insurance producer receives any compensation

authorized under ORS 735.455 (Surplus Lines), 744.091,

or ORS 744.093 from a prospective insured for trans-

acting insurance, neither the insurance producer nor

the ailiate may accept or receive any compensation

from an insured or other third party for the placement

of insurance for the prospective insured unless the

insurance producer, prior to the placement of and pay-

ment for insurance for the prospective insured has:

d) Obtained the prospective insured’s documented

acknowledgement that the compensation will be

received by the insurance producer or ailiate.

e) Disclosed the amount of compensation from the

insurer or other third party for the placement. If

the amount of compensation is not known at the

time of disclosure, the insurance producer shall

disclose the specific method for calculating the

compensation and, if possible, a reasonable esti-

mate of the amount; and

f) Disclosed the nature of the work that the

insurance producer or ailiate will perform on

behalf of the prospective insured.

When an insurance producer or any ailiate of the

insurance producer receives any compensation

authorized under ORS 735.455, 744.091, or 744.093

from a prospective insured for transacting insurance

and receives no compensation from an insurer or other

third party for placement of insurance for the prospec-

tive insured, the insurance producer or ailiate must

obtain the prospective insured’s documented acknowl-

edgment that the compensation will be received by

the insurance producer and must disclose the nature

of the work that the insurance producer or ailiate will

perform on behalf of the prospective insured.

A person is not a prospective insured if the person is:

a) A participant or beneficiary of an employee

benefit plan.

b) Covered by a group or blanket insurance policy

or group annuity contract sold, solicited, or

negotiated by the insurance producer or ailiate.

This does not apply to any of the following:

a) An insurance producer when the insurance pro-

ducer acts only as an intermediary between an

insurer and the prospective insured’s insurance

producer, such as a managing general agent,

a wholesale insurance producer under ORS

744.093, a surplus lines licensee when trans-

acting insurance with a producing insurance

producer under 735.455, or a sales manager.

b) An insurance producer with respect to an

incidental charge that is received from the pro-

spective insured and is authorized under OAR

836-071-0267 (Personal and Commercial Lines

incidental charges).

c) A reinsurance intermediary.

(a) “Ailiate” means a person that controls, is

controlled by or is under common control

with the insurance consultant or insurance

producer.

(b) “Compensation from an insurer or other third

party” means payments, commissions, fees,

awards, overrides, bonuses, contingent

commissions, loans, stock options, gifts,

prizes, or any other form of valuable

consideration, whether or not payable

pursuant to a written agreement.

does not include any fee or amount collected

by or paid to the insurance producer that

does not exceed an amount established by

the director of the Department of Consumer

and Business Services.

OAR 836-071-0263 — Fees Charged by Insurance

Consultants or Insurance Producers

(1) When an insurance consultant or an ailiate of

an insurance consultant receives from a prospec-

tive insured any compensation authorized under

the Insurance Code or rules adopted thereunder,

neither the insurance consultant nor the ailiate

may accept or receive any compensation from an

insurer or other third party for services provided to

the prospective insured in addition to the compen-

sation paid by the prospective insured unless the

insurance consultant, prior to the transaction:

(a) Has obtained the prospective insured’s docu-

mented acknowledgment that the compensa-

tion will be received by the insurance consul-

tant or ailiate; and

(b) Disclosed the amount of compensation from

the insurer or other third party for that place-

ment. If the amount of compensation is not

known at the time of disclosure, the insurance

consultant shall disclose the specific method

for calculating the compensation, and, if possi-

ble, a reasonable estimate of the amount.

(2) When an insurance producer or an ailiate of an

insurance producer receives any compensation

otherwise authorized under the Insurance Code

or OAR 836-071-0269 to 836-071-0277 from a

prospective insured, neither the insurance

producer nor the ailiate may accept or receive

any compensation from an insurer or other third

party for the placement of insurance in the same or

related transaction unless the insurance

producer, prior to the prospective insured’s

purchase of insurance, has:

(a) Obtained the prospective insured’s document-

ed acknowledgment that the compensation

will be received by the insurance producer or

ailiate; and

(b) Disclosed the amount of compensation from the

insurer or other third party for that placement.

If the amount of compensation is not known at

the time of disclosure, the insurance producer

shall disclose the specific method for calculating

the compensation, and, if possible, a reasonable

estimate of the amount.

(3) A person is not a prospective insured for the

purpose of this rule if the person is merely:

(a) A participant or beneficiary of an employee

benefit plan; or

(b) Covered by a group or blanket insurance policy

or group annuity contract sold, solicited, or

negotiated by the insurance producer or ailiate.

(4) This rule does not apply to:

(a) An insurance producer with respect to a

transaction to which ORS 735.455, 744.091, or

744.093 applies;

(b) An insurance producer when the insurance

producer acts only as an intermediary between

an insurer and the prospective insured’s

insurance producer, such as a managing

general agent, a wholesale insurance

producer under ORS 744.093, a surplus lines

licensee when transacting insurance with a

producing insurance producer under ORS

735.455 or a sales manager;

incidental charge that is received from the

prospective insured and is authorized under

OAR 836-071-0267; or

(d) A reinsurance intermediary.

OAR 836-071-0267 — Incidental Charges for

Customer Services; Personal, Commercial Lines

(1) This rule establishes incidental charges that an

insurance producer may impose for customer

services in connection with the transaction of

insurance. For the purpose of this rule, personal

lines insurance is property and casualty insurance

coverage sold to individuals and families for

primarily noncommercial purposes.

(2) An insurance producer may impose an incidental

charge established in this rule on a customer only

if the insurance producer has given written notice

to the customer that the insurance producer may

impose incidental charges authorized by this rule.

The notice must disclose all incidental charges that

the insurance producer may impose and the

service provided for each incidental charge. The

insurance producer must give the notice to a

customer before providing any service for which

an incidental charge may be imposed, but not later

than at the time of application or the renewal be-

fore the insurance producer commences imposing

the incidental charges. The written notice require-

ment does not apply to the binding or issuance of a

policy. At the time an insurance producer charges

an incidental charge under this rule, the insurance

producer must clearly disclose to the customer the

amount of the incidental charge and the service for

which the incidental charge is imposed.

(3) An insurance producer may impose an incidental

charge for rewriting or reinstating a policy that was

cancelled by the insurer because of an action or

inaction of the customer, such as nonpayment of

premium or failure to renew according to policy

terms, as provided in this section. An insurance

producer may not impose the incidental charge for

the first rewriting or reinstatement of the policy.

The incidental charges are as follows:

(a) A charge not to exceed $25 for personal lines

insurance.

(b) A charge not to exceed $100 for commercial

insurance.

(4) An insurance producer may impose an incidental

charge for taking a payment of premium in cash, in

an amount not to exceed $10.

(5) An insurance producer may impose an incidental

charge as authorized by ORS 30.701 for handling

and collecting on a check from a customer that is

returned for insuicient funds.

(6) An insurance producer may impose an incidental

charge for the actual cost of providing photographic

or inspection services to a customer in connection

with issuing or amending insurance coverage, but

the incidental charge may not exceed:

(a) $7.50 for the services in connection with issuing or

amending personal insurance coverage.

(b) $45 for the services in connection with issuing or

amending commercial insurance coverage.

(7)

An insurance producer may impose an incidental

charge for the actual cost of obtaining a motor

vehicle report from the Motor Vehicle Division of

the Oregon Department of Transportation or from

the comparable agency in another state.

(8) An insurance producer may impose an incidental

charge not to exceed $5 for preparing a duplicate

insurance identification card at the request of

customer, when the customer requests the

preparation

of the card instead of waiting for

the insurance identification card prepared by

the insurer.

(9) An insurance producer may impose an incidental

charge not to exceed $10 for each endorsement to

a personal lines insurance policy that is in addition

to the first six other endorsements by the insurance

producer to the policy within a six-month period.

(10) An insurance producer may impose an incidental

charge not to exceed $5 for obtaining a duplicate

SR22 filing on behalf of a customer when the

customer has lost or misplaced the original

SR22 filing.

(11) An insurance producer may impose an inciden-

tal charge not to exceed $5 for each certificate

of commercial insurance coverage issued by the

insurance producer that is in addition to the first

20 certificates requested by the customer for the

commercial insurance policy during a policy peri-

od.

OAR 836-071-0267 —

Service Incidental Charges

Rewriting or reinstating a policy (canceled due to

nonpayment or failure to renew). Does not apply to

first rewrite or reinstatement.

Up to $25 personal lines;

up to $100 commercial insurance

Accepting cash payments Maximum $10

Handling NSF checks Maximum $25 (ORS 30.071)

Photo/inspection services Maximum $7.50 personal lines;

up to $45 commercial lines

Obtaining motor vehicle reports Limited to amount charged by

DMV

Duplicate insurance cards Maximum $5

Endorsements (after first six in a six-month period) Maximum $10

Duplicate SR22 filing (if original is lost) Maximum $5

Certificate of commercial insurance coverage

(after first 20 certificates in any one policy period)

Maximum $5

836-071-0269 — Insurance Producer Service

Fees

(1) OAR 836-071-0269 to 836-071-0277 regulate the

charging of service fees by insurance producers.

(2) ORS 737.025 states, in part, that the purpose of

Insurance Code Chapter 737 (Rates and Rating

Organization) is “to promote the public welfare by

regulating insurance rates to the end they shall

not be excessive, inadequate, or unfairly discrimi-

natory.” ORS 737.205 requires every insurer to file

its rates with the director of the Department of

Consumer and Business Services. ORS 746.015

prohibits unfair discrimination “between risks of

essentially the same hazard in the application of

rates for insurance policies or in any other terms

or conditions thereof.” The director finds that, with

respect to personal lines of insurance, it is rea-

sonable and customary for the public to consider

all of the charges made by the insurer or its insur-

ance producer to be either an insurance premium

charge or a premium financing charge.

(3) OAR 836-071-0269 to 836-071-0277 are issued

under the general rulemaking authority of ORS

731.244:

(a) With respect to personal lines insurance

coverages to give eect to the rate regulatory

provisions of ORS Chapter 737 and the anti-

discrimination provisions of ORS 746.015; and

(b) With respect to commercial lines insurance

coverage to give eect to the provisions of ORS

746.015 (Discriminations), 746.405 to 746.530

(Premium Financing) and 742.009 (relating to

necessary information for insureds). Formerly:

OAR 836-030-0050

836-071-0272 — Scope of OAR 836-071-0269 to

836-071-0277; Definitions

(1) OAR 836-071-0269 to 836-071-0277 do not apply

to the transaction of life insurance, mortgage

insurance, or title insurance.

(2)

“Service fee” means a charge made by an insurance

producer with respect to an insurance transaction

to a party other than the insurer, which charge is not

a part of the insurer’s rate filing under ORS Chapter

737. “Service fee” does not include finance or service

charges governed by 746.405 to 746.530 (Premium

Financing). Formerly: OAR 836-030-0055

836-071-0274 — Service Fees Prohibited on Per-

sonal Lines

Except as provided in OAR 836-071-0267, a service fee

may not be charged with respect to the transaction of

insurance covering an individual’s person, property, or

liability. Coverage of several individuals as members of

the same family or household is considered individual

coverage for the purpose of this rule.

836-071-0277 — Service Fees Allowed on

Commercial Lines; Conditions

(1) Service fees may be charged with respect to the

transaction of insurance that covers other than an

individual’s person, property, or liability.

(2) Except as authorized in ORS 744.091 and 744.093, a

service fee may be charged only in those instances

where the insurance producer has provided service

additional to what is the usual and customary prac-

tice of insurance producers under similar circum-

stances. The insurance producer must give a written

explanation of the charge and the reason for it to the

person charged. If OAR 836-071-0260 or 836-071-

0263 applies to the transaction in which a service fee

is charged under this rule, the insurance producer

may include the written explanation with the disclo-

sure required by 836-071-0260 or 836-071-0263 or

provide the written explanation separately.

(3) A service fee may not be charged with respect to

arranging the financing of premium payments. This

does not preclude finance charges by insurance

pro-

ducers on their own accounts, or service charges

premium finance companies, which conform to the

provisions of ORS 746.405 to 746.530.

Oregon Division of Financial Regulation

350 Winter St. NE

P.O. Box 14480

Salem, Oregon 97309-0405

CONSUMER PROTECTION

440-2590 (10/23/COM)