Arkansas Insurance Department Clarifies Stance On Agents and Broker Fees In Lieu Of Commissions

N/Aonse to several inquiries as to whether agents and brokers may charge and receive fees for the services they provide in lieu of receiving commissions, the Arkansas Insurance Department has stated that, generally speaking, it is the Department's opinion that large commercial accounts may be solicited and sold on a fee in lieu of commission basis. This issue of charging fees in lieu of commissions is not specifically addressed within the Arkansas Insurance Code.

The Department stated that large commercial insureds are traditionally sophisticated buyers of insurance that may utilize any number of the wide variety of services being made available to them by agents and brokers, and are fully capable of evaluating and negotiating the purpose of insurance.

In a separate directive, the Arkansas Insurance Department Commissioner prohibited the giving of any gift, whether it be money, trading stamps, goods or otherwise, of whatever value, as an inducement to make inquiry about, to purchase or to renew insurance.

Token gifts of twenty-five dollars or less in value (wholesale), such as ballpoint pens, calendars, notebooks, and other items for advertisement purposes are not included.

The Arkansas Insurance Department also adopted a new "Limited Adjusters" rule. The new rule allows persons who wish to be licensed for adjusting and settling claims of their self-insured employer to obtain a license. The limited license is permissive and optional, and is not mandatory or required for those who do not wish to obtain it. Inquiries for license forms, instructions and fees should be directed to the License Division at 501-371-1750 and requests for copies of the new rule to the Legal Division at 501-371-2820.

Finally, the Department clarified the Risk-Based Capital Act, that requires all domestic insurers to prepare and submit an annual report of its Risk-Based Capital to the Commissioner on or prior to March 1 of each year. The Commissioner may exempt certain groups of companies from the requirements of the Risk-Based Capital Act and it has been determined that he will grant an automatic exemption at the current time to the following groups of companies:

• Hospital and/or Medical Service Corporations
• Health Maintenance Organizations
  
• Fraternal Benefit Societies
  
• Farmers' Mutual Aid Associations

Exemptions are available for other domestic insurance companies that write direct business only in Arkansas; write direct annual premiums of $35,000,000 or less; and assume no reinsurance in excess of 5% of direct premium written. However, these exemptions are not automatic and must be requested from and approved by the Commissioner on an annual basis. It is recommended that requests for exemptions from the annual reporting period be submitted by October 15.

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