U.S. life insurance agents are busy reviewing a new producer compensation proposal.[@@]
The National Association of Insurance Commissioners, Kansas City, Mo., released a new producer comp model draft Thursday. The latest draft mandates disclosure of compensation received for making the sale only if the producer is compensated by the policyholder,
“As of now, we’re encouraged, but there is some work to be done,” says Jim Edwards, a staff official at the National Association of Insurance and Financial Advisers, Falls Church, Va.
Officials of the American Council of Life Insurers, Washington, were not available for comment at press time.
The draft would amend the Producer Licensing Model Act.
The NAIC Executive Task Force still has to approve the draft, and all NAIC commissioners may vote on it Dec. 29.
A subsection added to earlier drafts says the new draft language will apply only in cases in which a producer receives compensation from both the policyholder and the underwriter.
A section of the current draft says:
This subsection shall not apply to an insurance producer who:
(a) does not receive compensation from the customer for the placement of insurance and
(b) discloses to the customer prior to the purchase of insurance that the insurance producer acts on behalf of an insurer that has appointed the producer in connection with that placement of insurance and that the producer may provide services to the customer on behalf of the insurer.
In most cases, the producer disclosure rules will require insurance producers to disclose in advance to any customers from whom they receive compensation that they also are receiving some payments from the insurance underwriters with whom the producers are placing the business. It also requires the producers to get written acknowledgments that they have told the customers of such dual compensation arrangements.
But the new rules also say that a person will not be considered a “customer” for purposes of the regulation if the person is “merely a participant or beneficiary” of an employee benefit plan or covered by a group or blanket insurance policy or group annuity contract that was sold, solicited or negotiated by the insurance producer or affiliate.