It is that time of the year when For-Hire Vehicle (“FHV”) drivers in NYC are scrambling to renew their FHV auto insurance policies. In the rush to renew, some drivers don’t look to see or even ask of their broker is charging them a fee for their services. I don’t mean the commissions paid by the insurance carrier as a deduction from premiums on the insurance policy. I mean an additional fee above and beyond. Believe it or not, some insurance brokers in NYC charge their clients a fee for administering the policy. This is not wrong or illegal, but it is illegal when it is not disclosed in writing and signed by the insured (the FHV driver). At renewal time a typical FHV driver simply looks at the total cost of the policy and sees if it is similar to what was paid the year before. If so, the driver often moves forward. What the driver needs to do is to look at the cost of the down payment that is due and add up all subsequent payments that will become due, then look at the total of all payments to see if it equals the cost of the policy. I am sorry to say that there are some brokers, who shall remain unnamed, who charge a fee to the FHV driver and simply add the fee in the down payment. If the driver were to pay the policy in full at inception, there would be no ability for the broker to add this fee on. (and I am not talking about the fees the insurer charges for the benefit of paying the policy over a period of time. This is not unusual). Brokers Fees are fine, but what bothers me the most is that most FHV drivers are unaware of these fees. Not disclosing such fees to the driver and getting the driver’s consent in writing is illegal.
While New York Insurance Law Section 2119(c)(1) does permit a broker to receive compensation from a policyholder in connection with procuring a FHV auto insurance policy, the broker may not receive any compensation, other than commissions deducted from premiums on insurance policies, from an insured on account of the sale, solicitation or negotiation of, or other services in connection with, any contract of insurance made or negotiated in this state or for any other services on account of such insurance policies or contracts, including adjustment of claims arising therefrom, unless such compensation is based upon a written memorandum, signed by the party to be charged, and specifying or clearly defining the amount or extent of such compensation. (emphasis supplied).
Insurance brokers bear the main burden of disclosure of fees and any other charges because they directly interface with the insurance buyer. Disclosure means full disclosure. Any broker that tries to hide the ball by lumping commissions, broker fees, inspection fees or other charges together for the insurance buyer is setting itself up for regulatory scrutiny, as well as detailed audits, substantial refunds, fines, and penalties.Consumer complaints to insurance regulators about the failure to fully disclose fees are serious and costly business. They also affect the brand and reputation of the producer. In addition to complaints lodged by the insurance buyer, such complaints can also be made by competitors. These complaints can tarnish a broker’s reputation in the marketplace, so the broker almost certainly will require the services of outside counsel. Not fun.
The bottom line is this: If you are an FHV driver, you should ask your broker if they charge you any fees on account of procuring your insurance policy and if so you should ask to see the written agreement. If there is no written agreement, then the broker who has received a fee from you in the past can be in some serious trouble. The FHV driver should then decide if he/she wants to continue to ask for a refund and whether to deal with the unscrupulous broker. If so, then that is the FHV driver’s prerogative. If not, then perhaps it is time for a change of FHV auto insurance brokers. There are plenty of them in NYC. Competition is high, but morality is often low. When we are at a time in history, such as now when FHV drivers are making less and less money, a driver can save $100-$200 by not paying the added brokers fee. If you want to, then that is up to you, but why pay it in the first place. I am not saying cheaper is better or paying a fee is unwarranted. Some brokers go the extra mile to earn that fee, but whether they go the extra mile or not, the broker must get the agreement of the FHV driver in writing. Similar to an attorney-client relationship, a broker-insured relationship is a relationship of trust. If you break that trust and violate the law, you give up your dignity and risk losing your license in the process.
I am proud to announce that Stable Insurance does not charge any brokers fee to FHV drivers. I am not saying that Stable Insurance does not go the extra mile. On the contrary, Stable does go the extra mile, but simply does not see the need or have the desire to gouge its customers. Business is made and lost on trust. Stable Insurance was built on a foundation of trust.
Think of all the people you do business with and consider if you trust them or have reason to not trust them. The best way for an FHV driver to determine if their insurance broker is deserving of your trust if to ask if a fee is being charged and if so, ask to see the signed contract. The proof is in the pudding.