State regulators are talking about requiring all brokers and agents to disclose all carrier payments to the insureds.[@@]
The National Association of Insurance Commissioners, Kansas City, Mo., has drafted a proposed amendment to the Producer Licensing Model Act that would prohibit “any insurance producer” from receiving any payments from a carrier unless the payment was disclosed in advance to the insured and the insured had agreed to the payment in writing, according to a preliminary draft of the proposal.
New York Insurance Superintendent Gregory Serio could unveil the proposed amendment to the model law Tuesday during a hearing on insurance brokerage practices before a subcommittee of the Senate Governmental Affairs Committee.
The proposed amendment was drafted last Thursday by a 12-member NAIC Executive Task Force on Brokerage Commissions headed by NAIC President and Pennsylvania Insurance Commissioner Diane Koken.
One section of the proposed model amendment would exempt payment of “nominal fees” from the proposed disclosure and paperwork requirements, but the model amendment does not appear to define the term “nominal.”
The proposed amendment will be the subject of a public hearing Dec. 4 at the next NAIC quarterly meeting in New Orleans. NAIC leaders want the amendment to the model law to be adopted quickly so they can push for enactment on all 50 states as soon as possible, according to a number of industry sources. Written comments will be accepted by the NAIC by Dec. 1.
The amendment says any insurance producer “or any business entity related to such producer” would be covered by the model law. Under the proposal, any producer entitled to receive commissions from an insured would not be allowed to do so unless the producer has received written consent from the insured stating “that such compensation will be received by the producer or business entity related to the producer,” according to the draft of the proposed amendment. Moreover, the proposed model law says, the producer must disclose to the insured the amount of compensation the producer is receiving from the insurer as well as the method for calculating such compensation, including any contingent compensation.
“If the amount of contingent compensation is not known at the time of disclosure, the producer shall disclose a reasonable estimate of the amount and method for calculating such compensation,” according to the amendment draft.
The proposed model law also would require an insurance producer to disclose the following information, to an insured or prospective insured, prior to the purchase of insurance:
–That the producer will receive compensation from the insurer for the sale.
–That the compensation received by the producer may differ depending upon the product and insurer.
–That the producer may receive additional compensation from the insurer based upon other factors, such as premium volume placed with a particular insurer and loss or claims experience.