Charging a Business Owner for Switching Before Renewal Date??

[mmaedelins]

I have a client I'm closing on who just told me his current agent is threatening to charge him a 10% penalty if he switches before his renewal date. His current policy renews in October. From what I'm told, this is illegal. Is it illegal or is this common practice? or both...

 

[jhplat5685]

Melissa,

I think he means the carrier he is with is going to charge him a 10% penalty which wouldn't be illegal it would be a normality. I have never heard of an agent personally charging a cancellation fee.

The way it would work with the carrier is they would charge a 10% penalty for the remaining balance of the premium.

 

[Guest]

Its called a short rate, usually happens on Commercial policies.

 

[djs]

Yeah, its not the agent charging it (hopefully), its the carrier. And yes, it's pretty much the norm which is why you work xdates on commercial.

Dan

 

[Tucker444]

Its called a short rate, usually happens on Commercial policies.

Correct. It is a short rate and the typical rate is 10%. Something it is ona sliding scale.

It is more than the norm...I have never heard of a company that doesn'tcharge a short rate up to a certain point. If they are a month or two out itmight have run the course.

But it is certainly not immoral or illegal it’s how business is done.

Commercial clients shouldn’t be running around switching all the time orearly. A customer needs to build a relationship with not just the agent but thecarrier too.

They should only switch if they are switching to me!

 

[mmaedelins]

Thanks for the info, everyone! I was able to tell my potential client that if he received the 10% penalty, we would lower his premium the amount he was charged to cover that cost. Hopefully he goes for it....

 

[Guest]

Thanks for the info, everyone! I was able to tell my potential client that if he received the 10% penalty, we would lower his premium the amount he was charged to cover that cost. Hopefully he goes for it....

WHOA...........................

You better be careful in what you say, how can you say this? WHo approved this? SO You arent giving him the best rte in the first place, that would piss off a client.

 

[FEX Quotes]

It's a short rate penalty which is 10% of the unearned premium.

For example, assume a $2,500 annual premium. If the policy were cancelled in the first month the short rate penalty would be about $250, while in the last month it would about $20

 

[iiinycboi]

It's a short rate penalty which is 10% of the unearned premium.

For example, assume a $2,500 annual premium. If the policy were cancelled in the first month the short rate penalty would be about $250, while in the last month it would about $20

non admit charges 25% earned premium so watch out for those if you missed the renewal date and advising the insured to change over 1-2 months in
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WHOA...........................

You better be careful in what you say, how can you say this? WHo approved this? SO You arent giving him the best rte in the first place, that would piss off a client.

This too, youre flat out telling him youre charging more than he would have to pay now. Also are you manipulating the coverage to lower premium?

 

[jhplat5685]

Unless you're carrier has some midterm cancellation bonus for new business