March 5, 2024

Michele Estrada

Department of Insurance and Financial Services,

Office of Appeals, Legal Research, and Market Regulation

530 W. Allegan Street

Lansing, MI 48933

Re:

Request for Rulemaking – Surplus Lines Insurance Fees

Dear Ms. Estrada,

The Wholesale & Specialty Insurance Association¹(WSIA) appreciates the opportunity to provide

comments on the Department of Insurance and Financial Services request for rulemaking regarding

surplus lines insurance fees. WSIA has concerns with the current language in the proposed rulemaking

request but are committed to working with DIFS to find language that will reflect the spirit of 2020 HB

5174 and provide appropriate protection for consumers. We have also attached a draft markup that we

hope you’ll consider as an alternative to the original draft.

WSIA identified three provisions of the request for rulemaking that we would like to identify:

•

Subsec�on (1) regarding the naming of speciﬁc expenses incurred for which a fee might be

charged – While we recognize that this list pre-dates the current revision, we don’t think this list

reﬂects that statutory changes that were made in 2020 or the reasonable circumstances under

which a surplus lines broker would need to charge a fee. Underwri�ng, state ﬁling requirements,

and data modeling are three common func�ons of the broker that would not be eligible for

recoupment under the exis�ng list. Surplus lines policies o�en require addi�onal eﬀort on the part

of the broker such that it would be virtually impossible to list all the items that might be considered

“unique to surplus lines.” Because of that, our preference would be to reiterate the statutory

standard, “underwri�ng and other expenses that are unique to surplus lines.” Furthermore, the

items on the exis�ng list would not be considered unique to surplus lines, as each of these items are

frequently obtained by retail agents on admited transac�ons. That being said, WSIA doesn’t have

any issue with the exclusion of costs incurred in maintaining oﬃces and compensa�ng employees,

which are not typical jus�ﬁca�ons for charging a policy fee.

¹WSIA is the U.S. professional trade association representing the wholesale and specialty insurance market and

the wholesale distribution system. WSIA presents approximately 400 wholesale broker member firms, 100 surplus

lines insurance companies, and 200 associates and service providers to the surplus lines market, our membership

operates in more than 1,500 offices representing tens of thousands of individual brokers, insurance company

professionals, underwriters and other insurance professionals worldwide – all of whom are committed to the

wholesale distribution system and U.S. surplus lines market.

•

Subsec�on (2) requiring the disclosure of a commission as part of the disclosure of the fee – WSIA

is not aware of any other state that requires the disclosure of a commission as part of the fee

disclosure, nor do admited transac�ons require the disclosure of a commission. Prac�cally, this

requirement would be complicated by the fact that the retail agent and the surplus lines broker

typically split the commission on a surplus lines policy (usually in favor of the retail agent).

Commissions are not disclosed on admited or surplus lines transac�ons in other states because the

cost of the commission is incorporated directly into the premium itself, whereas the fee cons�tutes

a value-added service to the consumer when coverage is unavailable in the admited market.

Iden�ﬁca�on of speciﬁc cap within the rule – We also think it would be helpful to note the

statutory cap on personal lines fees within the new rule. Simply to ensure compliance among the

surplus lines broker community, we would suggest that the rule incorporates the fact that personal

lines fees are restricted to $100 or 10% of the policy premium. The atachment includes some

poten�al language, but we would certainly entertain alterna�ves.

WSIA remains willing to dialogue directly with DIFS in order to find satisfactory language for the

proposed rule. Thank you for the opportunity to provide comments and please reach out if you have any

questions.

Sincerely,

John H. Meetz

Director of Government Relations

john@wsia.org

816.799.0863

US.114279177.01

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE BUREAU

SURPLUS LINES INSURANCE FEES

Filed with the secretary of state on

These rules become effective immediately after filing with the secretary of state unless adopted

under section 33, 44, or 45a(9) of the administrative procedures act of 1969, 1969 PA 306, MCL

24.233, 24.244, or 24.245a. Rules adopted under these sections become effective 7 days after

filing with the secretary of state.

(By authority conferred on the director of the department of insurance and financial services by

sections 210 and 1955 of the insurance code of 1956, 1956 PA 218, MCL 500.210, and

500.1955, and Executive Reorganization Order No. 2013-1, MCL 550.991)

R 500.1251, etc of the Michigan Administrative Code is amended, as follows:

R 500.1251 Surplus lines insurance fee.

Rule 1. (1) A surplus lines licensee issuing a commercial surplus lines insurance policy may

charge, in addition to the premium charged by an unauthorized insurer, a reasonable fee to cover

underwriting and other expenses that are unique to surplus lines and in the case of a

personal surplus lines insurance policy, a surplus lines licensee may charge a fee not to

exceed the greater of $100 or 10% of the personal lines insurance policy premium to cover

underwriting and other expenses that are unique to surplus lines. the costs incurred in the

placement of the insurance which exceeds $50.00 when the actual costs incurred for services

performed by persons or entities unrelated to the licensee exceed that amount. The fee allowable

under this rule shall be adjusted annually pursuant to the provisions of section 1915 of the

Insurance Code, 1956 PA 218, MCL 500.1915. Expenses unique to surplus lines do not

include costs incurred in maintaining offices and compensating the licensee’s employees.

Costs unrelated to the licensee do not include costs incurred in maintaining offices and

compensating the licensee’s employees.

(3) The licensee shall provide proof of the itemized fees charged and evidence of the

requisite disclosure of the fees to the director on request. The licensee shall file both of the

following with the commissioner in the form and manner prescribed by the commissioner:

(a) A report of all fees in excess of the amount allowable under subrule (1) of this rule

charged by the licensee.

(b) An affidavit stating that the licensee has not received compensation for the cost of these

services from the unauthorized insurer.

November 16, 2023

March 7, 2024

Michele Estrada

Department of Insurance and Financial Services,

Office of Appeals, Legal Research, and Market Regulation

530 W. Allegan Street

Lansing, MI 48933

Re:

Request for Rulemaking – Surplus Lines InsuranceFees (2023-62 IF)

Dear Ms. Estrada,

On behalf of over 5,000 Michigan Independent Insurance Agents, Big I Michigan (Michigan Association

of Independent Insurance Agents) appreciates the opportunity to provide comments on the

Department of Insurance and Financial Services request for rulemaking regarding surplus lines

insurance fees. Big I Michigan has concerns with the draft rule language, but we are committed to

working with the department to find language that will reflect the statutory intent of 2020 HB 5174 and

provide appropriate protection for consumers.

Big I Michigan identified three provisions of the request for rulemaking that we would like to identify:

1. Subsection (2) requiring the disclosure of a commission as part of the disclosure of the fee – Big I

Michigan is not aware of any other state that requires the disclosure of a commission as part of the

fee disclosure, nor do admitted transactions require the disclosure of a commission. Commissions

are not disclosed on admitted or surplus lines transactions in other states because the cost of the

commission is incorporated directly into the premium itself, whereas the fee constitutes a value-

added service to the consumer when coverage is unavailable in the admitted market.

Big I Michigan has concerns that this provision exceeds the intent of fee disclosure requirements

currently laid out in MCL 500.1915(2)(b).

2. Subsection (1) regarding the naming of speciﬁc expenses incurred for which a fee might be

charged – We have concerns that this list does not reﬂect the statutory changes that were made in

2020 or the reasonable circumstances under which a surplus lines broker would need to charge a

fee. Underwriting, state ﬁling requirements, and data modeling are three common functions of the

broker that would not be eligible for recoupment under the existing list. Surplus lines policies often

require additional eﬀort on the part of the broker such that it would be virtually impossible to list

all the items that might be considered “unique to surplus lines.” Our preference would be to

reiterate the statutory standard, “underwriting and other expenses that are unique to surplus lines”

as done in other states. Big I Michigan does support maintaining the existing language regarding the

exclusion of costs incurred in maintaining oﬃces and compensating employees, which are not

typical justifications for charging a policy fee.

3. Clarification of types of policies within the rule – We also think it would be helpful to clarify the

difference between personal lines fees and commercial lines fees within the rule. In subsection (1)

of the proposed rule, it discusses a reasonable fee for both personal and commercial policies.

However, the statute under MCL 500.1915(1)(b) already specifies how much of a personal lines fee

may be charged ($100 or 10% of the policy premium). Big I Michigan would recommend either

removing the reference to personal lines in the rule or incorporate the specific personal lines

language currently included in the law.

Thank you for the opportunity to provide comments and please reach out if you have any questions.

Sincerely,

Alex Houseman

Director of Government Relations

ahouseman@michagent.org

(517) 327-8044