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Broker Field Services For many RRGs/Group Captives, local brokers/agents are usually still involved. The Broker/Agent may place business with the RRG and may also provide some servicing as well. The Brokers almost always place other coverages not provided by the RRG. A commission, such as 10 percent, is usually charged to place the business. If one broker places most of the business being issued with the RRG/Group Captive, a lower commission may be negotiated, such as 5 percent. Is this amount proper? Again, it depends on the amount of actual servicing involved. Given that an RRG is frequently a captive market, the local broker is not marketing this piece of the program. Marketing is the primary activity performed in justifying a 10 percent fee. If there is no marketing, the fee should be much less. The next question is whether 5 percent is proper. ART’s solution is to identify how much time is actually spent servicing an account and then determine the appropriate compensation. A recent potential client reviewed by ART was charged less than 4 percent of premium for local services. But each policyholder paid over $40,000 for local services, which were merely a few onsite visits and some perfunctory collection of underwriting data that could have been done by phone or e-mail. The parent broker collected over $1.3 million in local fees, which ART believed should be less than $500,000 for comparable-in-quality services. Fees charged as a percentage of premiums do not necessarily reflect effort spent or the quantity of services delivered. For cost control minded RRGs or Group Captives, digging into the real cost structure can sometimes yield significant cost savings.
	F. Darrell Lindsey U.S. State Licensed Agent/Broker U.S. Corporate Enterprise Risk Management Consultant (ERM) U.S. State Approved Captive/RRG/Self Insured Manager U.S. Approved Self-Funded Health & W. C. Plan Manager
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