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October 27, 2004 at 08:00 PM
State insurance regulators are following up an announcement of a plan to investigate brokers fees to see if a problem exists and to regulate these fees to prevent future wrongdoing.
Diane Koken, president of the National Association of Insurance Commissioners, Kansas City, Mo., detailed plans worked out by commissioners to address any brokerage problems that come to light after a planned investigation.
Koken also defended the work of state insurance regulators. “Federal oversight would not have caught [alleged abuses] faster than the states.”
The New York insurance department has been working with Attorney General Eliot Spitzers office, she adds. In fact, she continues, both the New York and California insurance department had received a letter expressing concern about alleged mispractices in February and had started an investigation but had not gathered sufficient evidence to proceed, Koken adds.
She says federal lawmakers have not been in contact with her regarding the issue or its impact on the debate on federal regulation of insurance.
The immediate work of regulators has already started with the selection of a group of 13 state commissioners to investigate the issue, she says. That group includes Illinois, California, New York, Texas, New Jersey, Georgia, Connecticut, South Carolina, Pennsylvania, Oregon, Maine, Montana, and Missouri.
Prong 1 of a 3-prong approach the group plans is the “expeditious development of a model regulation for broker disclosure. Had there been greater transparency, there might not have been the structure to do alleged bid-rigging.”
This prong will focus on disclosure for broker compensation, she says. Whether or not broker will be defined to include an agent still needs to be discussed, she says. In Oregon, because of state requirements, the term broker in a proposed regulation that could be effective next month would include an agent.
Proposed regulations, including the pending one in Oregon and one in California, will be looked at along with all other available templates in developing the model regulation, Koken says.
Prong 2 will involve fact gathering, she adds. “We recognize that we still dont know the facts: whether it is one line, all lines, certain companies, certain regions, certain states. There needs to be a fact-finding effort.”
