Garamendi Defends Proposal For Complete Disclosure
California Insurance Commissioner John Garamendi defended his proposed regulation for full and complete disclosure of payments made by insurers to producers in testimony before a Senate subcommittee.
In his opening statement, Garamendi defended his proposed regulation as prompted by the wrongdoing found by New York Attorney General Eliot Spitzer in his investigation of insurance brokers.
The obligations for full disclosure “should be absolutely uncontroversial and should not be opposed by anyone interested in a fair, competitive, open market for insurance,” Garamendi testified. “As I have said, I believe that they merely clarify and make more specific what the law now requires.”
He continued, “With respect to disclosure of the amount of commissions, brokers and agents will ask, Why should we have to disclose the amount of our commissions? Most salesmen sell on commission, yet they are not required to disclose the source and amount of the compensation they receive.”
The answer, he said, “is that buying insurance is not like buying groceries. Securities brokers and real estate brokers are required to disclose the source and amount of their commissions, and so should insurance brokers and agents.
“You will be asked, Who do these obligations apply to? Only to brokers? Or to brokers and agents?” Garamendi said, noting that in California, “we have one license that permits a person to act as a broker or an agent. There are different requirements in different states. Our definition of who these obligations apply to is simple: Anyone who represents more than one insurer, or anyone who holds him or herself out as acting on behalf of the prospective insured, must abide by these requirements.”