Efforts To Shape Producer Fiduciary Model Continue
A producers fiduciary responsibility continues to get attention as state insurance regulators develop a model law that would offer a framework of requirements.
A recent discussion focused on sections 10 and 11 of the Fiduciary Responsibility of Insurance Producers model act draft which list prohibited practices in the use of fiduciary funds and requirements for timely disbursal of fiduciary funds.
The modelunder development for over five yearswould apply to all insurance producers receiving funds for the purpose of initiating or completing insurance transactions. The National Association of Insurance Commissioners says the model “should be helpful to states that do not have a law that prohibits producers from commingling funds. The model is intended to assist law enforcement and be a criminal deterrent among the producer community.”
One point regulators and representatives for producers and insurers focused on in their effort to clarify the model included the time period in which monies would have to be returned to the applicant.
The model currently uses 15 business days as the timeframe by which fiduciary funds must be paid either to the insurer or returned to the payer. The model defines fiduciary funds to include all funds received by an insurance producer from a client or premium finance company that are to be paid to an insurance company, or its agents, or to an insurance producers employer. It also includes funds from an insurer or its agents that are to be paid to a policyholder.
Producers need to know when the 15-day clock starts in order to have sufficient time to get the funds back to the applicant, according to John Fielding, a representative for the Council of Insurance Agents and Brokers, Washington, who spoke during a discussion on Section 11 of the draft.
In earlier comment letters, Fielding writes that the provision should be revised so that the time period starts on the date the producer is notified by the insurer that coverage has been denied.
Reproduced from National Underwriter Edition, April 8, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.