IIABA: NAIC Disclosure Rules Need More Work

By Michael Ha

NU Online News Service, Dec. 30, 3:34 p.m.EST?The country's largest agent-broker group said the newproducer compensation disclosure requirements adopted by theNational Association of Insurance Commissioners needs morework.[@@]

The Independent Insurance Agents & Brokers of America, basedin Alexandria, Va., said in a statement, that while it appreciatesthe regulators' effort, several issues still need to beresolved.

Among them:

? Improving the distinction between brokers and insuranceagents.

? Ensuring that consent and disclosure rules are "sensible andreasonable" and can be achieved.

? Clarifying that the requirement doesn't apply to renewal andresidual market business.

IIABA also cited concerns with the deferred portion of thedraft, Section B, which the group says was "overkill" because itwould apply to "every agent and broker in the country."

The section, which the NAIC said it would address within 90days, deals with specific disclosure issues regarding a broaderclass of producers. The section goes back to the NAIC's ExecutiveTask Force on Broker Activities for further development.

"Significant progress was made in the most recent draft. Butthere are still other issues that need improvement andclarification," Wesley Bissett, IIABA senior vice president ofstate relations and government affairs, told NationalUnderwriter.

But the president of the Kansas City, Mo.-based NAIC, andPennsylvania Insurance Commissioner, Diane Koken said theassociation's plan has been to adopt at least part of the proposalbefore the end of 2004.

"Our commitment has always been that we would try to getsomething moved out by the end of the year for the benefit of thosestates whose legislatures only meet for a limited period of time inthe calendar year," said Ms. Koken said during the NAIC'sconference call on Wednesday.

"These [requirements] are not engraved in stone. They can bechanged later if we identify errors," she said.

In an interview with NU after the conference call, Ms.Koken tried to address IIABA's concerns, making the followingpoints:

? On improving distinctions among different types of producers,she said: "It's very difficult to come up with a bright-linedistinction between brokers and agents.?It depended upon how theywere functioning. My question would be, 'Why is more disclosurebad?'"

? On ensuring that consent and disclosure requirements are"sensible and reasonable" and can be achieved: "I would like tothink that we would never propose anything we don't think issensible and reasonable. We think it is a balanced approach. Wewill continue to look at this issue and continue to work ondevelopment of additional model laws."

? On whether the requirement applies to renewal andresidual-market business: "As far as I am concerned, the languagedoes apply to renewal of a policy. There are other questions aboutwhether you have a policy and you add a car, does it apply to that?My position would be it does not."

Among the requirements contained in the model legislation,brokers would be required to disclose the amount of compensationfrom the insurer and the method for calculating the compensation,including any contingent compensation.

In cases where the contingent commission is not known, brokerswould be required to provide a reasonable estimate of the amountand method for calculating such compensation. Producers whorepresent companies, and do not receive compensation fromcustomers, would have a duty to disclose that relationship incertain circumstances.

A request for comment from the Council of Insurance Agents &Brokers, a trade association representing the world's largestbrokers, was not returned.

A draft of the model legislation is available on the NAIC Website at www.naic.org.