Checklist Of Considerations In Negotiating A Producer/Agency Agreement

Factors to Consider

I. Producer Duties

A. Production activity

1. which licenses to obtain and maintain

2. types of business to solicit

3. meet established production goals

B. Service and support activity expected

1. type and extent of activity - placing business handling claims, making collections

2. account development - house and/or own accounts

C. Work hours and related subjects - vacations, sick leave, holidays, leaves of absence, jury duty, military duty

D. Obligation to devote all working time to business of agency - other business activities only with permission

E. Provide insurance - types required (E & 0, Fidelity, Auto) limits, evidence of coverage, who pays

F. Compliance with agency rules regarding:

1. confidentiality of client data

2. use of agency property

3. collecting and remitting premiums

4. attending agency meetings

5. educational requirements - what, when, how, who pays

G. Limits of authority

1. dealing with customers and companies - binding, advancing premiums, underwriting, extending agency credit

2. incurring agency expense

3. hiring or firing support personnel

II. Compensation

A. Basic compensation

1. salary

2. commission - on new and renewal business

3. commission with a draw

B. Participation in other agency income - bonus and contingent commissions, consulting fees, prizes and contests, discretionary bonuses

C. When compensation is earned and paid

III. Ownership of expirations or dollars of value

A. Exclusively by agency?

B. Exclusively by producer?

C. Jointly by agency and producer - percentage owned by each?

IV. Option to purchase agency interest - waiting period, conditions, limits, price, payment method

V. Vesting of commissions - waiting period, schedule, value, exchange for ownership share

VI. Employee benefits

A. Transportation - car, business mileage, personal mileage

B. Expense account - business, travel, moving

C. Memberships - clubs, service organizations

D. Group Benefits - what/which types available, who pays

E. Retirement plans and stock options

F. Contingency plan in event of death, disability, or divorce

VII. Agency duties

A. Pay compensation|

B. Supply prospects - leads, house accounts

C. Provide office facility and support staff

D. Handle advertising and public relations

E. Secure and maintain company markets

F. Maintain production and validation records

G. Provide insurance - E & O, Auto, other

H. Provide training as needed

VIII. Termination

A. Contract duration

B. Cause for termination - at will, for cause, early or otherwise

C. Notice required - form, time

D. Severance pay arrangements

E. Return of agency property - records, supplies, equipment

F. Post-termination controversy or claims - procedure for arbitration, remedies

G. Producer's right to copy files in event of purchase