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December 30, 2004 at 07:00 PM
Insurance regulators have approved portions of a proposed compensation disclosure amendment draft to the National Association of Insurance Commissioners’ producer licensing model act.[@@]
The amendment provisions, designed to make producer fee arrangements more transparent to clients, was adopted during the NAIC’s executive committee plenary conference call late yesterday.
The regulators had been seeking to approve at least part of the measure before 2005 so that state legislatures can consider it in the new year.
The regulators adopted Section A of the draft, which proposes that a producer receiving any compensation from a customer for an insurance placement, or representing the customer in that placement, shouldn’t accept any compensation from an insurer or other third party for that placement unless the customer gives permission to do so.
Specifically, before the customer’s purchase of insurance, the producer must:
? Obtain the customer’s documented acknowledgment that such compensation will be received by the producer or affiliate.
? Disclose the amount of compensation from the insurer or other third party for that placement. If the amount of compensation is not known at the time of disclosure, the producer shall disclose how such compensation is calculated and, if possible, a reasonable estimate of the amount.
