Michigan Modifies Surplus Lines Brokers’ Fee Limits

On March 17, 2020, Michigan Governor Gretchen Whitmer signed House Bill 5174 into law, amending the Insurance Code regarding the fees that a licensed surplus lines broker or agent may charge. Previously, MCLS § 500.1915 capped such fees at $50 by code ($64 after adjusting for inflation since 2008). Under the new law, licensees can charge a fee for a surplus lines policies in addition to the commission if the fee is not included in the premium as was “reasonable to cover underwriting and other expenses that are unique to surplus lines.”

The requirement applies in general to commercial lines. For personal lines, a licensee can now charge a fee up to the greater of $100 or 10% of the policy premium. The fees must not be excessive or discriminatory and cannot be included in premium to calculate premium taxes. Additionally, fees must be disclosed in writing to the insured prior to the sale and itemized on the policy declarations page, billing statement, and other documentation. Finally, the amendment has removed the inflation adjustment on the fee.

For more information about House Bill 5174 and MCL § 50.1915, or any questions regarding surplus lines brokers, please contact Westmont Associates, Inc.