My broker has billed me for fees in addition to the premium
You have dealt with a damage insurance broker to find an insurance policy that best meets your needs. However, when you receive the invoice, you notice that the broker has charged you fees in addition to the premium. What explains these fees and what are your options?
The role of the damage insurance broker
Brokers work in brokerage firms that that offer a variety of damage insurance products from a number of insurers. In summary, their role is to :
- prepare an overview of your situation and identify your needs;
- request quotes from their network of insurers;
- advise you on the coverage offered;
- present you with the quote that best meets your needs.
Commissions and costs
Brokers are compensated through a commission, which generally ranges from approximately 12.5% to 20% of the annual premium that you pay the insurer. The commission is included in the premium that the broker submits to you.
However, brokers can charge you other types of fees, including professional fees, for certain services such as:
- drawing up a new contract;
- renewing your contract;
- making a change during the term of the contract;
- cancelling the contract, if need be.
The amount the broker charges for professional fees is determined by the following criteria1:
- his experience;
- time devoted to the case;
- the difficulty of the matter;
- the size of the case;
- the liability assumed;
- provision of unusual services;
- the result obtained.
According to the Code of ethics of damage insurance representatives2, the broker is ethically obligated to notify his client of all fees and costs, including professional fees, which are not included in the amount of the insurance premium. Aside from professional fees, these “other costs” may also include the cost of inspections, and the fee for issuing a policy or opening a file. He must also disclose to you the fact he is receiving another form of compensation, such as a commission.
The Regulation respecting information to be provided to consumers3 requires that disclosure of these costs be made:
- in writing;
- before or at the time services are rendered.
As the client, you may accept or refuse these costs at the time of transaction; you cannot be forced to accept a “fait accompli.” If you disagree with the fees you were charged, you can try to negotiate with your broker or take your business to another brokerage firm or another insurer.
However, there is an exception.
The broker may disclose these additional costs or fees after the service has been rendered by mentioning it on the invoice, as long as they do not exceed:
- $50 for personal lines insurance (home or automobile);
- $250 for business lines insurance.
These costs must nevertheless have been initially declared at the time the contract was drawn up.
What to do if your broker charges you fees
- Ask questions. Your broker has an ethical obligation to explain the fees charged to you. If he has charged you professional fees, he can explain how he calculates his rate.
- Verify whether these fees were disclosed to you when you purchased the contract. Clauses regarding fees are commonly included in the broker-client contract.
- If you signed a contract with your broker, verify whether the fees, costs and professional fees are stipulated in the contract.
- If you believe the rates are unjustified or were not properly disclosed, you may make a complaint to the brokerage firm’s complaints department to resolve the situation.
- If you believe that the broker did not comply with his ethical obligations, and you want him to rectify his professional practice, you may make a complaint to the Syndic’s Office of the ChAD.
In the final analysis, brokers have a right to charge you for costs and fees in addition to the premium, while continuing to comply with their obligations. If you do not agree, you may take your business to another broker or insurer.