NAIC Broker Comp Model May Arrive By Christmas

One panelist at the broker comp session talked about the time it would take for a broker to pull together an initial compensation disclosure.

“Someone is getting paid for service,” replied New Jersey Insurance Commissioner Holly Bakke. “Please don’t say it [disclosure] is too difficult to provide. You may need to rethink the system.”

Gary Cohen, general counsel at the California Department of Insurance, rejected the idea that regulators should focus on improving future compensation disclosure requirements.

“Disclosure is not enough to deal with the problems that are already taking place,” Cohen said. “A broker is supposed to represent the client, and, if it isn’t doing that, why is it entitled to charge a fee for a service?”

When a broker presents offers only from carriers for which it has a contingent fee arrangement, “it is committing fraud, pure and simple,” Cohen said.

Ron Panneton, a representative for the National Association of Insurance and Financial Advisors, Falls Church, Va., and other groups, said a model law or other regulation should apply only when there is more than nominal compensation. The model should require disclosure of the fact that there is compensation from an insurer but not the amount of the compensation.

The amount of a producer’s commission does not affect the value of the product being offered, Panneton said.

Overly detailed disclosure “focuses attention on how much the producer is receiving rather than on important matters such as how much insurance is needed and what kind of insurance is needed,” Panneton said.