Life groups are still asking state regulators to cut a compensation disclosure provision from a proposed amendment to the Producer Licensing Model Act.[@@]

The National Association of Insurance Commissioners, Kansas City, Mo., is developing the amendment in response to allegations by state insurance regulators and New York State Attorney General Eliot Spitzer that many customers fail to realize that brokers are being compensated both by customers and by insurers.

But a coalition of 4 life groups has sent the NAIC a letter stating that the groups will support the proposed PLMA amendment only if the NAIC removes a disclosure provision given in Subsection B of the current draft.

The groups are the American Council of Life Insurers, Washington; the Association for Advanced Life Underwriting, Falls Church, Va.; the National Association of Insurance and Financial Advisors, Falls Church; and the National Association of Independent Life Brokerage Agencies, Fairfax, Va.

The NAIC has addressed many of the groups’ concerns about an earlier draft of the amendment, but Section B continues to be an obstacle, the groups write.

Subsection B would require producers to disclose to clients prior to sales that their compensation arrangements might differ depending on the products or companies involved.

Producers also would have to explain that they might receive additional compensation from insurers or other parties based on other factors.

It’s not clear how the Subsection B disclosure requirements would mesh with state antirebating and antidiscrimination laws, and the requirements would go beyond the scope of dealing with the issue that the NAIC is trying to address, the groups write.

“Neither our organizations nor, we suspect, our regulators have had the opportunity to carefully consider the full impact of Subsection B,” the groups write. “Consequently, we cannot realistically envision supporting the proposal if it includes that subsection because of its potential to fundamentally alter the operation of our businesses without the thoughtful analysis, discussion and process necessary to avoid serious adverse consequences to us and to our customers.”

The letter also includes a complicated paragraph about how the life groups would react if the NAIC keeps Subsection B in the proposed PLMA amendment.

“Subject to final determinations by our respective governing bodies, if Subsection B is removed from the amendment to the PLMA, the strong sense of the organizations signing this letter is to support the amendment as it comes up in state legislatures next year; but if it remains, our opposition to the model and enactment of it in the states seems very probable,” the groups write.