Why brokers need to understand premium finance regulations
Premium financing is regulated at the state level. The rules governing rates, disclosures, cancellation notices, and arranger fees vary depending on where your client's policy is written — not where your agency is located.
For a broker writing commercial lines across multiple states, that complexity adds up fast. Get it wrong and you are exposed to regulatory risk, client disputes, or an unenforceable finance agreement.
This guide cuts through the complexity with a plain-language breakdown of premium finance regulations for every state where Patch operates: Texas, Florida, Illinois, California, North Carolina, and South Carolina.
Note: This guide reflects regulations as of early 2026. Always verify current requirements with your state Department of Insurance or a licensed PFC before structuring a client agreement.
Texas: the most broker-friendly state
Texas is widely considered the most permissive state for premium finance arranger fees and is one of the best states in the country for independent brokers who want to earn additional revenue on financed accounts.
Regulatory body: The Texas Finance Commission and Texas Department of Insurance (TDI) jointly regulate premium finance companies under the Texas Premium Finance Company Act (TX Ins. Code Ch. 651).
Arranger fees: Texas allows brokers to charge arranger fees with no hard statutory cap. Fees must be reasonable, connected to services performed, and disclosed in writing to the insured before the agreement is executed. If a broker receives both a carrier commission and an arranger fee, both must be disclosed.
Example: A Texas broker finances a $90,000 commercial package and charges a 3% arranger fee. That is $2,700 paid directly to the agency — on top of the 10% carrier commission already earned. Total agency revenue on this one account: $11,700.
Rate: State-regulated; varies by loan size. Confirm current rates with your PFC.
Cancellation: 10 days written notice to both the insured and the agent before the PFC can exercise the power of attorney to cancel.
Broker licensing: No separate premium finance license required. Partner with a licensed PFC like Patch.
Florida: strong market, strict cancellation rules
Florida has one of the largest commercial property markets in the US, driven by hurricane exposure, construction, and hospitality. High premiums make it one of the strongest premium finance states in Patch's footprint.
Regulatory body: The Florida Office of Financial Regulation (OFR) licenses premium finance companies under Chapter 627, Part XVI of the Florida Statutes.
Arranger fees: Florida allows brokers to earn arranger fees. Written disclosure to the insured is required prior to execution of the agreement.
Rate cap: Maximum service charge is $12 per $100 per year on the outstanding balance, plus a one-time nonrefundable charge not exceeding $20.
Cancellation: Under FL Stat. § 627.848, the PFC must give 10 days written notice to the insured and the agent before cancellation. Unearned premium waterfall: carrier refunds unearned premium to the PFC, PFC recovers the outstanding loan balance, any remainder returns to the insured.
Broker licensing: No separate license required. Partner with an OFR-licensed PFC.
Illinois: large market, key compliance details
Illinois is home to one of the largest commercial lines markets in the Midwest. Contractors, manufacturers, and logistics companies across the Chicago metro and downstate are strong premium finance candidates.
Regulatory body: The Illinois Department of Insurance (IDOI) regulates premium finance under Article XXXIIA of the Illinois Insurance Code (215 ILCS 5).
Arranger fees: The permissibility and structure of arranger fees in Illinois depends on how the arrangement is structured. Confirm the specifics with your licensed PFC before including an arranger fee in a client agreement.
Rate cap: Illinois caps the service charge at $10 per $100 per year plus an allowable flat charge. The statute limits charges to those expressly permitted under Article XXXIIA.
Cancellation: 10 days written notice to insured and agent. The power of attorney authorizes the PFC to request cancellation — stay ahead of any client payment issues to avoid unexpected cancellations.
Broker licensing: No separate license required. Partner with an IDOI-licensed PFC like Patch.
California: biggest market, strictest disclosure rules
California is the largest commercial P&C market in the US and has the most demanding disclosure requirements of any state in Patch's footprint.
Regulatory body: Premium finance companies must be licensed under the California Financing Law (CFL), regulated by the Department of Financial Protection and Innovation (DFPI). PFCs must register as California entities — a stricter requirement than most states.
Arranger fees: California allows arranger fees for pure brokers — those not appointed as agents by the insurer whose policy is being financed. Appointed agents generally cannot charge a separate arranger fee. Pure brokers must have a signed Broker Fee Agreement and the required Standard Broker Disclosure form.
Disclosure requirement: Under Cal. Ins. Code § 778.2, if you arrange premium financing and receive any compensation from the PFC, you must disclose to the insured in writing — before the agreement is executed — the exact dollar amount of compensation you will receive. Records must be retained for three years. This is the strictest disclosure rule in Patch's footprint.
Example: A California broker (not appointed by the insurer) finances a $120,000 commercial real estate policy and charges a 2% arranger fee ($2,400). Before the client signs, the broker provides a written disclosure stating the exact compensation amount. Client signs. Agreement proceeds.
Cancellation: Standard 10-day written notice to insured and agent.
Broker licensing: No separate license required. Partner with a DFPI-licensed PFC operating under the CFL.
North Carolina: fast-growing market, clean framework
North Carolina's commercial market is expanding rapidly. The Research Triangle and Charlotte are seeing strong construction and technology sector growth, and eastern NC has a substantial agricultural base — all sectors with premiums that benefit from financing.
Regulatory body: The NC Department of Insurance (NCDOI) regulates premium finance under Chapter 58, Article 35 of the NC General Statutes.
Arranger fees: Confirm the permissibility and structure of arranger fees in North Carolina with your licensed PFC before including one in a client agreement.
Rate cap: $12 per $100 per year on the declining balance, plus a nonrefundable origination fee not exceeding $15 per agreement.
Cancellation: 10-day written notice to insured and agent. Be aware of potential commission chargeback exposure if a financed policy is cancelled — check your agency agreement and E&O policy.
Broker licensing: No separate license required. Partner with an NCDOI-licensed PFC.
South Carolina: coastal market, straightforward rules
South Carolina's commercial market is anchored by Charleston and Myrtle Beach hospitality and construction, plus significant Upstate manufacturing. Coastal property exposure creates above-average premiums — a natural fit for premium financing.
Regulatory body: The SC Department of Insurance (SCDOI) regulates premium service companies under SC Code Title 38, Chapter 39.
Arranger fees: Confirm the permissibility and structure of arranger fees in South Carolina with your licensed PFC before including one in a client agreement.
Rate cap: The greater of 1% per month on the outstanding balance or a filed-and-approved per-installment amount, plus an initial charge of up to $20 per agreement.
Cancellation: Standard 10-day notice to insured and agent before cancellation can be initiated.
Broker licensing: No separate license required. Partner with an SCDOI-licensed premium service company like Patch.
Why multi-state licensing matters
A PFC licensed in only one or two states cannot legally originate premium finance agreements in states where they are not licensed. That means multiple relationships, multiple portals, and separate documentation requirements for different accounts.
Patch is licensed in Texas, Florida, Illinois, California, North Carolina, and South Carolina — one relationship and one platform for your entire multi-state book.
Ready to partner with a multi-state licensed PFC?
Submit your agency profile and we will confirm our current rates, disclosure requirements, and arranger fee program for your specific states.
Frequently asked questions
Do I need a license to offer premium financing to my clients?
No. Insurance brokers do not need a separate premium finance license to arrange financing. The licensing obligation sits with the PFC, not the broker. You simply need to partner with a PFC that holds a valid license in each state where the policy is written.
Are arranger fees legal in all states?
No. Arranger fees are permitted in some states and restricted or unavailable in others. Even where allowed, the fee must typically be disclosed in writing to the insured before the agreement is executed. Always confirm with your PFC whether arranger fees are permitted in your specific state before including them in a client agreement.
What happens to unearned premium if a financed policy is cancelled?
The carrier refunds the unearned portion of the premium to the PFC. The PFC uses those funds to pay off the outstanding loan balance. Any remainder is returned to the insured. The broker typically receives nothing and may owe commission back to the carrier depending on the agency agreement.
Can a PFC cancel my client's policy without notifying me?
In all six states covered in this guide, PFCs are required to send cancellation notice to both the insured and the agent — typically 10 days before cancellation takes effect. Choose a PFC that proactively notifies your agency and gives you a window to intervene before cancellation is initiated.
What is the power of attorney in a premium finance agreement?
The power of attorney authorizes the PFC to request cancellation of the insured's policy if the insured defaults on payments. It does not give the PFC authority over anything else — only the right to initiate the cancellation process after the required notice period has passed.
