Further changes in producer compensation rules beyond those adopted in recent months by state regulators–including an end to contingency commissions–appear unlikely.[@@]
In remarks echoed by industry officials, North Dakota Insurance Commissioner Jim Poolman said Sunday, “I don’t believe this issue has shelf life,” adding later, “the issue will fade away.”
Poolman is chairman of the producer licensing working group of the National Association of Insurance Commissioners.
William Anderson, vice president and associate general counsel of the National Association of Insurance and Financial Advisors, Falls Church, Va., gave the same assessment of the issue.
They made their comments at a panel discussion on the opening day of the Annual Conference of the American Council of Life Insurers, being held in Washington.
Poolman said he did not support recent changes in compensation disclosure regulations in the Producer Licensing Model Act recently approved by the NAIC. He said he did not think the changes were needed because some underwriters and members of such trade groups as the Independent Insurance Agents and Brokers of America had agreed voluntarily to transparency, he said.
In addition, he said, bid-rigging by major brokers being prosecuted by New York Attorney General Eliot Spitzer were illegal per se, and prosecution of such wrongdoing therefore did not require new laws.
Members of the panel did not seem to feel Spitzer’s investigations, in which he has been joined by state officials in California and Connecticut, would bring about major changes in industry producer practices.
However, the New York Attorney General has reached legal agreements with large brokers for changes in disclosure and other practices. The brokers also paid fines to the state and agreed to compensate customers. Spitzer has also been successful in persuading industry leaders Marsh, Aon and the Willis Group to eliminate contingent commissions.
One panel member said, “The issue is fading away into the sunset.”
J. Bruce Ferguson, ACLI’s senior vice president, state relations, said “some of the dire predictions” associated with the Spitzer probe, including claims of “widespread corruption” by insurance producers, “have not come true.” But he did say the changes to the Model Act approved by the NAIC as a result of the Spitzer probe “are designed to bring transparency to the broker compensation process.”
Referring to Spitzer’s job title, Poolman observed, “AG also stands for aspiring governor.” Moreover, he said, in his state, “you start banning contingency commissions, and some of the smaller rural agencies will go out of business, and the existing producer distribution system dries up.”