Rules Change on Adjusting Commission Rate on Commercial Proposals
The ability to request a lower commission rate on a commercial account has been officially restricted. While the Maryland Insurance Administration’s (MIA) position on the permissibility of variable rate filings had gone back and forth in the past, two bills (HB 1078 and HB 1127) and Bulletin 18-13 are shutting the door to the practice, unless:
- the commercial account meets specific criteria and
- the commercial account has executed a document to evidence that it meets those criteria (Certificate of Qualification as an Exempt Commercial Policyholder).
Changes made to the law this year (and becoming effective on Oct. 1, 2018) are now precluding the ability for carriers and producers to adjust a commission rate unless the insured qualifies as an Exempt Commercial Policyholder, which means it meets at least two of the following characteristics:
- Generates more than $5,000,000 of annual revenue or sales
- Has a net worth in excess of $2,500,000
- Employs at least 25 full-time employees
- Is a non-profit organization or public body with an annual budget of at least $5,000,000
- Is a municipal corporation with a population of at least 15,000
Carriers currently using variable commission rates have been asked to submit new filings that comply with the changes. Producers need to be mindful of the change and properly secure a signed Certificate of Qualification for each applicant or policyholder for which a reduced commission is going to be applied.
Access Bulletin 18-13 (includes a sample Certificate of Qualification as an Exempt Commercial Policyholder)