State legislators will likely consider at least a couple of proposals this session inspired by New York Attorney General Eliot Spitzer’s insurance brokerage probe, but a crucial voice in the discussion, the Department of Business Regulation, isn’t ready to take a stand yet.
Secretary of State Matt Brown, a strong critic of the insurance industry as well as the DBR, is submitting a bill that requires clear, written disclosure of any compensation that insurance producers get for writing a policy.
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The National Association of Insurance Commissioners, in which the DBR is involved, has proposed a more limited approach, with a model law that would require insurance “producers” to tell customers of any compensation they expect to receive from the carrier, but exempts producers who aren’t paid by the customer.
Consumer advocates wanted the NAIC to also require brokers to disclose all quotes they receive, and to recognize a fiduciary responsibility from brokers to their customers. But the final version, approved in a conference call in December, omits those items.
Given the relatively limited scope of the NAIC proposal, the Independent Insurance Agents & Brokers of America, which had lobbied against tougher regulations, has embraced the NAIC model law. But the group does want to clarify several questions, such as whether the exemption effectively covers all agents, since only brokers are paid by customers, and whether the requirements would apply only to new policies, or also renewals.
Locally, Bill Preston, a past president of the Independent Insurance Agents of Rhode Island, an IIABA member, offered a similar view.
“We certainly strongly support the concept,” he said. “But there’s some language that requires clarification. And we still have some concerns about how workable it is in the current format. We don’t want to see it become a burden for our members or the public.”
Preston, who chairs a group that has been reviewing the broker incentive issue, said the agents’ association want to meet with DBR officials to discuss the NAIC proposal and address the open questions, though no date has been set.
At the DBR, however, Joseph L. Torti III, the insurance superintendent, said he and his staff are still reviewing documents gathered in a survey of Rhode Island-based insurance companies – about 30 – designed to identify broker and/or agent compensation practices that might need to be addressed. The materials go back to 1996.
Torti said he was part of the NAIC conference call that resulted in approval of the model law, and he said the DBR would “most likely” end up proposing legislation this year based on the NAIC model, but he doesn’t know for sure yet.
“We have stacks of documents that we’re going through,” he said. “We’re also coordinating with other states.” Torti estimated that the review would take four to six weeks. In the meantime, he said, the DBR is monitoring developments across the country “very closely.”
