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Old 10-16-2018, 05:36 PM
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Default Question - Regulatory

So I have a question.

All hypothetical of course.....

We have a book which is in need of a 5 percent rate increase due to changes in the underlying loss costs. The MGA who administers this book is telling us that some of their producers would be willing to accept this rate increase, and others would be willing to keep the rate the same but absorb the loss cost increase as a decrease to their commission and brokerage (this is for competitive reasons). There are no real difference between the producers with accepting the higher rate and those keeping the lower rate. Is this something which would pass regulatory muster.

Assume for the sake of argument it is a 50 state rate filing.

Thanks.
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Old 10-16-2018, 05:47 PM
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this is a commercial book?
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Old 10-16-2018, 05:56 PM
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this is a commercial book?
Personal line
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Old 10-16-2018, 06:00 PM
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i'll not be any help - i'm all commercial
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Old 10-16-2018, 06:07 PM
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Quote:
Originally Posted by Red Klotz View Post
So I have a question.

All hypothetical of course.....

We have a book which is in need of a 5 percent rate increase due to changes in the underlying loss costs. The MGA who administers this book is telling us that some of their producers would be willing to accept this rate increase, and others would be willing to keep the rate the same but absorb the loss cost increase as a decrease to their commission and brokerage (this is for competitive reasons). There are no real difference between the producers with accepting the higher rate and those keeping the lower rate. Is this something which would pass regulatory muster.

Assume for the sake of argument it is a 50 state rate filing.

Thanks.
I think it would. commission is somethign that is filed.
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Old 10-16-2018, 07:20 PM
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wow, glad i never did pers lines
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Old 10-16-2018, 08:04 PM
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Quote:
Originally Posted by Red Klotz View Post
So I have a question.

All hypothetical of course.....

We have a book which is in need of a 5 percent rate increase due to changes in the underlying loss costs. The MGA who administers this book is telling us that some of their producers would be willing to accept this rate increase, and others would be willing to keep the rate the same but absorb the loss cost increase as a decrease to their commission and brokerage (this is for competitive reasons). There are no real difference between the producers with accepting the higher rate and those keeping the lower rate. Is this something which would pass regulatory muster.

Assume for the sake of argument it is a 50 state rate filing.

Thanks.
First, the obligatory disclaimer: I am not a lawyer, and it's been years since my past life where I supported government relations.

I believe the primary regulatory concern will be whether this arrangement is deemed to violate anti-rebating statutes.

In some (many?) states, the regulators will be receptive to the idea, but there may need to be an assurance that the producer will have either the full-rate/full-commission price, or that the producer will have the lower-rate/limited-commission price. The producer must not have the ability to pick the rate/commission on a policy-by-policy basis.

In other states (I don't remember which, but they were among the usual suspects)...even that arrangement might be deemed rebating by the regulator. You'll need to decide what to do / what to attempt when that happens. You might choose to not allow reduced commissions in those states, or you might consider presenting the product as two-or-more programs, where agents are assigned to one and only one program, and the rates are differentiated primarily on the expense differences.
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Old 10-18-2018, 03:42 PM
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I work for a single state WC writer, and we have agents who often contribute commission to get a deal done. This happens on a deal by deal basis, not a blanket change in commission rate.

But, it's WC, not personal lines, and a single state, so YMMV.
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Old 10-18-2018, 05:31 PM
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Originally Posted by Maphisto's Sidekick View Post
First, the obligatory disclaimer: I am not a lawyer, and it's been years since my past life where I supported government relations.

I believe the primary regulatory concern will be whether this arrangement is deemed to violate anti-rebating statutes.

In some (many?) states, the regulators will be receptive to the idea, but there may need to be an assurance that the producer will have either the full-rate/full-commission price, or that the producer will have the lower-rate/limited-commission price. The producer must not have the ability to pick the rate/commission on a policy-by-policy basis.

In other states (I don't remember which, but they were among the usual suspects)...even that arrangement might be deemed rebating by the regulator. You'll need to decide what to do / what to attempt when that happens. You might choose to not allow reduced commissions in those states, or you might consider presenting the product as two-or-more programs, where agents are assigned to one and only one program, and the rates are differentiated primarily on the expense differences.
This approach seems most plausible. Have two different underwriting companies with separate rating plans.
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  #10  
Old 10-19-2018, 02:38 PM
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Just to add to my answer, as I asked a few people, apparently when an agent contributes commission to get a deal done, the actual mechanism used is an expense credit, which is part of our filing. So, technically what we are doing is filed.

TIL...
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