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As a producer in Michigan, what other requirements must I be cognizant of with regard to writing insurance in the surplus lines market?
Notice must be delivered to Policyholder
Per MCL 500.1922, “Each policy, cover note, or other instrument evidencing surplus lines insurance which is to be delivered to an insured or a representative of an insured shall have printed, typed, or stamped in red ink upon its face, in not less than 10-point type, the following notice: ‘This insurance has been placed with an insurer that is not licensed by the state of Michigan. In case of insolvency, payment of claims may not be guaranteed’ This notice shall not be covered over or concealed in any manner.”
Evidence of Placement with Eligible Unauthorized Insurer
Per MCL 500.1950, the licensee placing coverage with an insurer which is neither an authorized insurer nor an eligible unauthorized insurer shall:
(a) Mail or deliver to the resident the following notice: “This insurance has been placed with an insurer not licensed by the state of Michigan nor recognized by the insurance commissioner as an eligible unauthorized insurer. In case of any dispute relative to the terms or conditions of the policy or the practices of the insurer, the insurance commissioner may not be able to assist in the dispute. In case of insolvency, payment of claims is not guaranteed.” A copy of the notice shall be filed with the commissioner.
(b) Collect from the resident insured appropriate premium taxes and report the transaction to the commissioner on a form prescribed by the commissioner. If the resident insured fails to pay the taxes when due, the insured shall be subject to a civil fine of not more than $1,000.00, plus accrued interest from the inception of the insurance.”
Surplus Lines Taxes / Fees
Per MCL 500.1915,
(1) A licensee may charge a fee as follows:
(a) For a surplus lines insurance policy, a fee in addition to a commission only if the fee is not included in the premium and the fee is reasonable to cover underwriting and other expenses that are unique to surplus lines.
(b) For a personal lines insurance policy, a fee not to exceed the greater of $100.00 or 10% of the personal lines insurance policy premium.
(2) All of the following apply to a fee charged under subsection (1):
(a) The fee must not be excessive or discriminatory. The licensee shall maintain complete documentation of all fees charged and evidence of the disclosure required under subdivision (b).
(b) The fee must be fully disclosed in detail to the insured, whether directly or through another licensed insurance producer, in writing before the sale. The fee must be separately itemized on any of the following:
(i) The policy declarations page.
(ii) The billing statement.
(iii) Other documentation provided to the purchaser setting forth the cost of the policy.
(c) The fee must not be included as a part of the policy premium in the computation of premium taxes.