The National Conference of Insurance Legislators is weighing in on the broker compensation issue.[@@]
The Albany, N.Y., group has proposed model legislation that responds to the investigations conducted by New York Attorney General Eliot Spitzer.
The measure is more comprehensive than a comparable proposal put out by the National Association of Insurance Commissioners, Kansas City, Mo., Nov. 15. The NAIC proposal focuses mainly on disclosure.
Incoming NCOIL president Rep. Craig Eiland, a Democratic member of the Texas House, drafted the proposal for discussion purposes only. He plans to meet with NAIC officials in December at the group’s winter meeting. The NAIC has scheduled a public hearing on its members’ proposal for the first day of the hearing.
In addition to requiring full disclosure, the NCOIL measure would require a broker to have a fiduciary relationship with a client.
Another provision of the NCOIL measure calls for something akin to a suitability requirement. Brokers would have to pick the best available insurance products for their clients.
John Washburn, a former NAIC president who represented the Council of Insurance Agents and Brokers, Washington, at the NCOIL meeting, said the suitability section of the proposed NCOIL model would set “an impossible standard to meet and would also lead to endless litigation.”
Eiland said it is important that any model prevent future abuses by giving regulators market conduct supervisory power over brokers.
“Some states have this and some don’t,” Eiland said.
While Eiland conceded that the suitability measure will be stricken, it is not clear what will become of the fiduciary component.
Georgia Commissioner John Oxendine told the lawmakers that he did not see too many problems with the concept.
But Washburn said it presents the possibility of many unforeseen consequences.
“Determining the scope of the fiduciary duties purportedly created here would take many years of litigation to resolve,” he said.
Eiland also held out the possibility that NCOIL will join with the NAIC to develop a joint measure, to gain greater clout in the states next year.