Do you have written agreements with your retail producers? Do your retail agreements address the main areas of potential exposure? It is strongly recommended that wholesale insurance brokers enter into formal written agreements with retailers that identify key points in the relationship, including respective rights and obligations. It is alarming that a wholesaler does not have a formal written agreement with retailers, which exposes the wholesaler to a number of responsibilities. This article describes the critical provisions that should be taken into account in an agreement with a retail producer. 7. Relations between the partiesThe agreement should reflect the fact that the relationship between the parties must be that of the independent contractors and that there is nothing in the agreement to justify the relationship between the client and the representative between the parties or between the wholesaler and the retail manufacturer`s customers. The agreement should also reflect the fact that it does not establish an agency relationship between the retailer and an insurer. 6. Premium PaymentThis it is important for the retailer to understand and recognize that the wholesaler`s activity depends on maintaining a good credit relationship with its markets and insurers and that the wholesaler will receive damages because it has not paid the premiums, fees and fees on time. As a result, the agreement should explicitly specify how premiums are paid and the due date. In addition, the agreement should indicate whether the transfer of premiums is a reduction in commission or a deduction of taxes, brokerage fees or police fees. All royalties should be clearly broken down and defined in the agreement or, if necessary, in a separate offer, binder or directive.
The agreement should also provide that the retail producer is solely responsible for collecting and paying all insurance costs, including, but not limited to, minimum insurance premiums and costs, counter-signatures and related fees, which are charged by a state, or fees and taxes. 3. CommissionsA commission plan should be attached to the agreement and specify when commissions are earned and commission rates paid. If commission rates are unknown, the commission plan should stipulate that commissions in the wholesale market are determined by the risk class and the insurer. In addition, there should be a provision allowing the wholesaler to unilaterally change the commission after 30 days. In addition, the agreement should provide that commissions are paid only if: (i) the distributor holds an adequate licence, (ii) has paid all amounts earned and the amounts earned by the wholesaler (and grants the wholesaler the right to pay commissions with such outstanding amounts) and (iii) does not contravene in substantial breach of the agreement. The previous article refers only to certain key provisions proposed in an agreement between the wholesaler and the retailer. There may be other essential elements that should be considered and incorporated into the agreement.
In addition, the necessary arrangements may vary depending on the particular circumstances of the wholesaler and the retailers with whom he or she works. It is recommended that wholesalers consult definitively for the development of such agreements.