The insurance industry in Wisconsin has exchanged business on an informal basis for years. The rule acknowledges the need for certain exchanges of business and establishes the procedures to be used.
The proper exchange of business means the forwarding of insurance from one licensed agent who cannot place the business with any of the companies with which he is listed to another licensed agent listed with a company which will write that piece of business. The agent forwarding the business may split the commission involved. Proper exchange of business differs from brokerage because of its occasional and exceptional nature.
- Reasons: Business may only be exchanged for certain reasons specified in the rule. The agent may properly exchange business if the companies with which he or she is listed:
- Refuses to accept the business because of capacity problems,
- Refuses to accept the risk or some part of it, or
- Imposes onerous conditions on the insured (i.e., excessive premium).
- The agent forwarding the business must be licensed in that line of insurance, and the business must have arisen in the regular course of his or her own business.
- The client must know that another agent will be involved in the transaction. Therefore, the application must be signed by each of the agents who handled it. If no application is completed, the names of the agents involved in the transaction must appear on the policy. These rules will ensure that clients know what company the business is placed with and what agents are involved in the transaction.
- Limits: Because proper exchange of business only occurs occasionally, guidelines define how often it may occur. An agent will exceed the occasional exchange of business if more than five insurance risks per calendar year are placed with any single insurer with which he is not listed, or if the agent exchanges more than 25 insurance risks per calendar year for all insurers.