The Broker Compensation Disclosure & How to Comply

The Broker Compensation Disclosure & How to Comply with AgencyBloc

What is the Broker Compensation Disclosure?

If there is one thing you can always count on in the health and life insurance industry, it’s that changes will happen. The latest broker compensation disclosure requirement is no different. 

In December 2021, the Consolidated Appropriations Act (CAA) launched new disclosure requirements for group health plans, individual brokers, and consultants. These plans specifically require brokers and consultants to disclose their compensation to plan sponsors if they anticipate earning $1,000 or more in direct or indirect compensation. The anticipated earnings include “all forms of compensation, including standard ongoing compensation, bonuses, finder’s fees, prepaid (advanced) commissions, payments made by third parties, incentive programs not solely related to the plan, etc.”

This requirement includes any new, extended, or renewed plan that goes into effect on or after December 27, 2021.

As part of this requirement, you must disclose the following:

  • Description of services to be provided
  • Statement of who (you/affiliate/subcontractor) is providing services to the plan fiduciary
  • Description of direct compensation
  • Description indirect compensation
  • Description of compensation on a transaction basis (commissions, finders fees, incentives)
  • Description of compensation for termination of the contract and prepaid amounts

It is essential for all health and life insurance agencies to stay compliant with this requirement, but that doesn’t make it an easy task. Therefore, it’s crucial to store your client and commission data in a way that helps you get the information you need when you need it. 

For more information on the Broker Compensation Disclosure, check out these resources:

Using an AMS to Help You Stay Compliant with the Broker Compensation Disclosure

All health and life insurance agencies that anticipate selling or renewing qualifying plans in the future must comply with this new federal regulation and thus, need an efficient way to do so. There are two main ways to gather the information and disclose.

Manually

Manually tracking your upcoming sales that will qualify for the disclosure requires you to create your own disclosure letter and manually manage client accounts to ensure you issue the disclosure in a timely manner to the correct client. Your company could adopt this option; however, depending on the size of your book of business and the number of policies you have that would qualify for this disclosure, this task could quickly become time-consuming. Plus, it opens you up to potential errors and missing clients that do qualify for the disclosure.

Using an Agency Management System (AMS)

Using an AMS, like AgencyBloc, your process could be more efficient. An AMS can:

  • Quickly identify upcoming sales and renewals that will require a disclosure
  • Provide a downloadable report with the exact information you need to fill out the disclosure form
  • Help you stay on track with notifications and reminders to issue the disclosure at the right time
  • Centralize your client paperwork and create a digital paper trail that you can refer back to and trust

AgencyBloc’s Broker Compensation Disclosure Report

AgencyBloc is the #1 Agency Recommended Management System for health and life insurance agencies. In an effort to provide our clients with the tools they need to be successful, we’ve added the Broker Compensation Disclosure Report. This report identifies which of your clients need to receive the compensation disclosure and brings together the data you need to fill out your compensation disclosure form.

Centralizing your client and commission data gives you better visibility so that you can more accurately track which of your clients qualify for the disclosure and when they received the disclosure from you. AgencyBloc’s Commission Module gives you a complete view of your incoming compensation to provide you with the information you need to process, track, and disclose appropriately. Once you’ve issued the disclosure, add a copy to AgencyBloc’s CRM that is date and time stamped to create a digital paper trail you can trust.

Likewise, you can add an additional step in AgencyBloc’s Sales Pipeline to ensure you send the disclosure to upcoming new and renewal sales and use Automated Workflow to assign a task to the person on your team who issues the disclosures. Once the task is completed, that information is reflected in the client’s record for additional auditing and process management.

An example Sales Pipeline for employee benefits could look like this:

Stage Stage Aging Win Probability
Qualified 3 Days 10%
Fact Finding 10 Days 10%
Initial Meeting/Proposal Presented 5 Days 15%
Closing Meeting 3 Days 25%
Awaiting Decision 10 Days 50%
Verbal Approval 3 Days 85%
Send Broker Compensation Disclosure 2 Days 95%
Paperwork Submitted 5 Days 95%
Closed Won
Closed Lost

Having these steps in place means that you’re staying ahead of the process and never missing a thing. Plus, you’re staying compliant and doing your due diligence to take care of your clients and provide them with an optimal level of service. This allows you to add more value to your new and existing client relationships, improve your retention rate, and increase the chance of cross-selling.

Ready to See AgencyBloc in Action?

Request a 1-on-1 demo to see AgencyBloc live, view the Broker Compensation Disclosure tools, and explore the Commission Module to help you streamline your processes and increase your productivity.

Allison Babberl

By Allison Babberl on May 13, 2022 in Commissions Processing

Allison is the Marketing Content Specialist at AgencyBloc. She creates educational content and designs videos to promote AgencyBloc's resources to help you organize, automate, and grow your insurance agency. Favorite quote: “Conversation is the bedrock of relationships. Without it, our relationships are devoid of substance.” -Maribeth Kuzmeski  More articles

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