Compliance Corner

This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only. Note: Division publications may include references to the Florida Statutes and/or the Florida Administrative Code. The laws noted in our publications are/were in effect at the time of publication but may have been repealed, amended or replaced and new laws may have been enacted subsequently.

Compliance Topic of the Month: Failure to Collect Bail Bond Premium ~ Unlawful Rebating?

The Florida Statutes require bail bond agents to charge the exact surety bond premium amount filed by the surety company with the Florida Office of Insurance Regulation (OIR), nothing more and nothing less.

We are aware of bail bond agents and agencies who are not collecting the full premium, and in some cases, no premium. The bail bond agent must still pay the insurer and MGA their share of the premium. Not collecting the full premium costs the bail bond agent money to write and post the bail bond. This practice demonstrates more than questionable business skills, it is not permitted under the Florida Statutes.

If the bail bond agent is not making any attempt to collect the balance due, then he/she is discounting the premium filed with the OIR, or providing a rebate to the person who should have been paying the premium.

The surety company, or the professional bail bond agent, filed the rate they said would be the amount needed to provide the service guaranteed under the bail bond contract and allow them to make some profit and remain solvent. If the bail bond agent does not collect the full amount of the premium, then the net premium that was collected is going to be some percentage less than the premium filed with the Office. That amount is either the amount of the discount provided to the premium payer, or it is the amount of the rebate provided.

For example:
The premium rate filed with the OIR is $500 for a $5,000 bail bond. If the bail bond agent only collects $100, then the balance of $400 is the amount of the discount or rebate provided.

The reason some bail bond agents charge less than their competition for a bail bond is to try to get more business, which may appear to be good on the surface, but in reality it poses its own problems.

Bail bond agents who are not charging the full premium may be charged with violating s.648.33(2), F.S. This section requires the executing bail bond agent to charge the full premium for the bail bond being written.

Other violations that can be charged in this situation include s.648.44(1)(g), F.S., unlawful rebating, which states the bail bond agent may not "Pay a fee or rebate or give or promise anything of value to the principal or anyone in his or her behalf.”

Section 648.45(2)(i), F.S. allows the Department to seek suspension or revocation of a bail bond agent for rebating or offering to rebate, or unlawfully dividing or offering to divide, any commission, in the case of a limited surety agent, or premiums, in the case of a professional bail bond agent. If a bail bond agent does not collect the full premium, he/she is forgoing commissions earned in favor of the indemnitor.

A bail bond agent who is not collecting the full bail bond premium, can also be charged with violating s.626.9541(1)(h), F.S., which is part of the unfair trade practice statutes. This says the bail bond agent may not provide any unlawful rebate of premiums, may not pay a fee or rebate or give or promise anything of value to the principal or anyone in his or her behalf special favor or advantage or any valuable consideration to the person paying the premium as an inducement for that person to use that bail bond agent and not another.

Section 626.9541(1)(o)2., F.S., also part of the unfair trade practice statutes, applies as well. This law means the bail bond agent may not knowingly collect any sum that is less than the premium for that surety contract, or bail bond.

We strongly recommend that agencies keep extensive records of their efforts to collect the balance of the premium.

What's the Difference? Referral Fees, Marketing/Advertising Gifts and Unlawful Inducements

We are frequently asked about referral fees, marketing or advertising gifts, and what constitutes an unlawful inducement. These three topics are often confused by licensees. Let's review the definition and practical use of each, lawful and unlawful:

Referral fees - referral fees are either cash or an item given to the source of a referral provided for the referral of a prospective insurance customer. The fees are lawful provided they are given for every referral, not just those that result in insurance sales. Acceptable fees can be paid in cash, with a gift card, merchandise, lottery tickets, etc. There is NO limit on the amount of a cash referral fee or the value of merchandise. [s.626.112(8), F.S.]

Marketing/Advertising Gifts - these are items of merchandise given to prospective or current policy holders or to the public that market or advertise a licensee or agency. Acceptable items include coffee mugs, golf balls, golf towels, mouse pads, calendars, etc., and generally include the name of the agent or agency. Cash, gift cards, lottery tickets, etc., are not acceptable advertising gifts. The value of the merchandise given to each person cannot exceed $25. [s.626.9541(1)(m), F.S.]

Unlawful Inducements - the definition of an unlawful inducement in its simplest terms is to give a prospective customer, existing customer or any other entity or person a "thing of value" in exchange for something of value to the licensee. An example is giving any person or entity cash, its equivalent, merchandise, lottery tickets, tickets to a sporting event, etc. in exchange for the ability to produce an insurance quote or sell insurance. An example is to give every person that asks for an auto insurance quote a $5 gift card. If another agent or agency sells the same product for the same price, the consumer may choose to work with the licensee that offers the gift card. The law was created in part to deter unfair competition among licensees. [s.626.9541(1)(h), F.S.]

Title Agencies: Update Your Info for the 2016 Administrative Surcharge

Subsection 624.501(27)(e)2, F.S., requires any title insurance agency licensed in Florida on January 1 of each year to remit an administrative surcharge of $200 to the Florida Department of Financial Services. Therefore, we are reminding all title agencies that the 2016 administrative surcharge due date will soon be approaching.

NOTE: This surcharge is not related to the one imposed on each new policy written due to the receiverships of National Title Insurance Company and K.E.L. Title Insurance Group, Inc.

Any title insurance agency licensed in Florida on January 1, 2016, will be emailed a reminder a few days afterward to the agency's email address on file with the Department. To ensure you receive the invoice and avoid failing to pay by the January 30 due date, please log in to the MyProfile account for your title agency and make sure the correct email address is on file. While doing so, we also recommend you do the same for your individual MyProfile account.

Occasionally we discover agencies that were not aware of the reminder because of the retirement or termination of the employee assigned to monitor the email address provided to the Department. Failure to open the email sent by the Department containing the administrative surcharge reminder does not release an agency from the January 30 deadline. Please verify your information soon so this does not happen to you. If you need our assistance, you may contact us at Title@MyFloridaCFO.com to assist you through the steps to update your information. Be proactive; do not procrastinate.

Failure to pay the surcharge on or before January 30, 2016 will result in administrative action which could include a fine, in addition to the original surcharge. Payment must be made securely online via the title agency's MyProfile account. Paper checks are not accepted.

Compliance Information

Department licensees and consumers can access compliance information at the Division's web page Compliance Information. Additional information is available by type of license at our Frequently Asked Questions web page.