Facing an estimated $1.5 billion budget shortfall for the current fiscal year, Virginia legislators are seeking solutions to get the state out of the red, but don’t appear to be going the same route as their peers in Connecticut.

There, as part of a new budget, the state doubled the majority of its licensing fees levied by the department of insurance as one way to help eliminate its $8.5 billion deficit.

The move left agents’ groups in Connecticut figuring out how to deal with how their members, many of whom are small business owners, can operate with the new fee schedule while the economy already presents them with daily challenges.

Dennis Yocom

Dennis Yocom, executive vice president of the Professional Insurance Agents of Virginia and D.C., told IFAwebnews.com his group has not heard of a similar fee hike in the commonwealth.

“We would certainly and aggressively oppose such a legislative or regulatory proposal in the coming session,” Yocom said. “The impact of an agent fee increase during this deep and continuing recession would be more strain on agency revenues which we hear are generally down by 12% again this year.”

Bob Bradshaw Jr., president and CEO of the Independent Insurance Agents of Virginia, noted that with company premium taxes going to transportation in Virginia and agent fees for the state’s bureau of insurance and continuing education board, he’s seen no discussion on increasing either fee to impact state coffers.

“I think, in Virginia, the premium tax is dedicated to transportation and the legislative sense is that it is maxed out and they have to look at other sources for transportation funding,” he said.

‘One of those hard pills to swallow’

Among the increased fees facing Connecticut’s agents and brokers directly are licenses or renewals for insurance producers ($80; up from $40), public adjusters ($250; up from $125) and surplus lines brokers ($625; up from $500). Fees for other services such as exams, copies of licenses and filings for appointments also doubled.

Warren Ruppar, president of the Independent Insurance Agents of Connecticut, told IFAwebnews.com his members were aware that insurance fees would be increased by state legislators, but did not know the extent until the budget was finalized.

“Unfortunately, it is one of those hard pills to swallow, but you know as a businessperson you are going to see it,” Ruppar said.

Ruppar said given the current economy, the insurance industry was already experiencing lower premiums and agencies going out of business in the state and now come the increased fees.

“You have to pay the fees to stay in business,” he said. “The difficulty of the increases, for an agent, is that you can’t pass the increase onto you customer. You need to absorb it. You throw that [on top of the difficulties from the economy] into one big pot and it’s difficult.”

Diane Fowler, executive director of the Professional Insurance Agents of Connecticut (PIACT), said her group also “anticipated” the fee increases “as the state is looking for solutions to a growing budget crisis.”

“PIACT members are small business owners, who provide jobs in their communities and contribute significantly to the Connecticut,” she said. “We are never pleased, particularly in these challenging economic times when our members are required to carry increased taxes and fees.”

This story originally appeared in the November 2009 print edition of Insurance & Financial Advisor.