Serio Unveils NAIC Proposal On Broker Comp Disclosure
Washington
Representing the National Association of Insurance Commissioners, New York Insurance Superintendent Greg Serio outlined for a Senate committee last week a "three-pronged" program that state regulators will implement to strengthen oversight of agents and brokers.
Serio was representing the NAIC as chairman of its Governmental Affairs Task Force. He said the three-pronged program to protect consumers will include an amendment to a model law on broker disclosure of compensation. The program also will coordinate multi-state information requests and analyses of certain business practices by brokers and insurers, and launch an online system that will allow anonymous filing of "tips" to alert state regulators about unlawful or unscrupulous business practices.
Under the proposed amendment to the Producer Licensing Model Act drafted by the NAIC, "any insurance producer," whether broker or agent, would not be allowed to receive any payments from a carrier unless it is disclosed in advance to the insured and the insured has agreedin writingto the payment.
The language recently was drafted by a 12-member NAIC Executive Task Force on Brokerage Commissions headed by NAIC President and Pennsylvania Commissioner Diane Koken.
It is expected to generate an intense reaction from the agent/brokerage community, both because of the large amount of bookkeeping compliance it will require and because it may have a disproportionate impact on small agents and brokers. Appearing to anticipate that response, the NAIC added language to the proposed amendment that would exempt payment of "nominal fees" from such disclosure and paperwork, the language says. How "nominal" would be defined, however, is seen as critical to winning support from small producers.
The proposed amendment will be the subject of a public hearing at the next NAIC quarterly meeting in New Orleans on Dec. 4. The NAIC, in order to show it is on top of the issue in the wake of investigations of wrongdoing by brokers, wants the amendment to the model law to be adopted quickly so it can push for enactment in all 50 states as soon as possible, according to a number of industry sources. Written comments on the proposal are due by Dec. 1.
Reacting to the NAICs proposal, David F. Woods, CEO of the National Association of Insurance and Financial Advisors, said, "We want to help consumers make informed buying decisions."
