§ 127.5. Compensation of licensees.
(a) The total compensation of a licensee under a contract, including deferred compensation, shall bear a reasonable relationship to the actual services which he renders to the company.
(b) A net override commission or fee may not exceed 10% of the gross premiums written by the company.
(c) Compensation provisions shall, through a reasonable service fee formula or by other appropriate means, avoid an arrangement which may encourage the under-reserving of claims, improper underwriting practices or other results detrimental to the best interests of the policyholders of the company, claimants or of the general public.
(d) Forms of compensation or income intended to be received by or accrued to the benefit of the licensee, directly or indirectly from the company, shall be set forth in the contract. The sources of income shall include, but are not necessarily limited to, the following:
(1) Salaries or fees paid to the licensee or to officers or directors of the licensee.
(2) Insurance agents’ commissions.
(3) Rental payments for real or personal property leased from the licensee by the company or profits realized on sales by the licensee to the company.
(4) Value of services or facilities furnished by the company to the licensee.
(e) Compensation of a nature paid to relatives of the licensee or to relatives of the officers or directors of the licensee; to a business entity controlled by licensee, relatives of the licensee or relatives of the officers or directors of the licensee; or to close business associates of licensee, shall be disclosed to the Insurance Commissioner.
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