Regulators are pondering what it means when an insurance agent or broker “acts on behalf of the customer.”[@@]
The subject came up here today at the winter meeting of the National Association of Insurance Commissioners, Kansas City, Mo., as insurance commissioners, industry representatives and consumer advocates discussed the draft of a proposed amendment to the Producer Licensing Model Act.
The NAIC began developing the draft earlier this year, when reports surfaced of problems with broker compensation structures and broker comp disclosure practices.
NAIC President Diane Koken, the Pennsylvania insurance commissioner, said she wants the NAIC to receive comments about the draft amendment by Thursday; issue a new draft soon after; open a second, brief comment period; then adopt the model amendment by the end of the year, so that states can include it in their 2005 legislative calendars.
Regulators agreed that, in the near term, they would focus most of their efforts on Section A of the draft, which deals with disclosure language, rather than on Section B, which deals with what the producer must disclose.
Section A would apply to any situation in which “any insurance producer or any affiliate of such a producer receives any compensation from the customer or acts on behalf of the customer.”
Before the customer bought insurance, Section A would require the producer or affiliate to document the fact that the customer knew of the existence of any compensation and knew of the amount of the compensation. Otherwise, the producer could not receive any commissions or other compensation in connection with the insurance purchase.
If the producer or affiliate did not know just how much compensation was coming, the producer or affiliate would have to give a reasonable estimate, along with a method the customer could use to estimate compensation payments.
Some reactions to the draft: