Insurance carriers and agents alike are vehemently objecting to a proposal by the National Association of Insurance Commissioners to expand a recently approved model law on broker compensation that is expected to serve as a basis for reforms across the nation this year.
The model law, as approved, requires insurance producers to tell customers that they’ll be paid by the carrier for writing their policy, and roughly how much, but only if the customer is paying the producer – the typical arrangement for a broker, not an agent.
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When NAIC members approved the model law, on Dec. 29, they deferred a vote on a tougher disclosure requirement that would include telling each customer, if applicable:
The Independent Insurance Agents & Brokers of America, the nation’s largest insurance trade association and a critic but guarded supporter of the model approved Dec. 29, wrote to the NAIC saying it “strongly opposes” the new language.
“The provision, which has the broadest possible scope, would impose unnecessary generic disclosure obligations on every insurance agent and broker in the country and offer questionable benefit to consumers in the process,” the letter says.
“No rationale, justification, or need for this subsection has been presented, and we urge the nation’s insurance commissioners to reject the application of these needless costs and burdensome new requirements to the hundreds of millions of insurance transactions that take place every year.”
Separately, the National Association of Mutual Insurance Companies (NAMIC) on Wednesday sent its own protest letter to the NAIC, saying the new language was unnecessary, and discussing it would distract insurance commissioners from the more urgent task of clearing up some “ambiguities” in the already approved model law.
“While we can appreciate the NAIC’s desire to provide a product for this year’s legislative sessions, the necessary haste has made it impossible to identify and resolve the ambiguities that are inevitable in the legislative drafting process,” the NAMIC letter says. “Therefore, it is imperative that the NAIC’s early efforts are tightly focused to compensate for the problems inherent in abbreviated public debate. Attempting to resolve undefined problems with hastily drafted legislation is bad public policy.”
Joseph L. Torti III, insurance superintendent at the Rhode Island Department of Business Regulation, has been involved in the NAIC discussion, but has yet to determine what, if any, legislative changes he’d like to recommend to the General Assembly.
Secretary of State Matt Brown has included a mandatory compensation disclosure in a comprehensive insurance reform bill he’s presenting to legislators.
