Serio Unveils NAIC Proposal On Broker Comp Disclosure

He added that, “We always have supported disclosure of the relationship between the agent and the company and the total cost of putting a policy on the books during the buying process. Knowing the total cost of the insurance is most helpful to consumers.”

Woods said NAIFA, “working in close concert with the Association for Advanced Life Underwriting and the American Council of Life Insurers, stands ready to assist the NAIC to improve and implement its action plan, help root out the actors involved in any misconduct and restore consumers confidence in our industry.”

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 from the insured its “written consent that such compensation will be received by the producer or business entity related to the producer.” Moreover, the amendment 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.”

The proposed amendment 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; and,

–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.

At the hearing, Serio also defended state insurance regulation. “Insurance is a complex commercial product that is very much different from banking and securities. Consequently, the process for regulating insurance products must also be different,” and then brought up the pocketbook issue. “Ultimately,” Serio said, “a federal regulator would adversely affect state premium taxes and other revenues, which totaled $12.3 billion in 2002.”

Reproduced from National Underwriter Edition, November 18, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.