Calif. Senate Panel Nixes Broker Fiduciary Bill

By Steve Tuckey

NU Online News Service, April 29, 8:42 a.m. EDT?California Senate panel yesterday voted to reject a bill supported by Insurance Commissioner John Garamendi to impose new fiscal duties on brokers and agents.[@@]

"This is a huge, huge victory for insurance brokers, agents and consumers, and an equally huge defeat for Mr. Garamendi," said Steve Young, Insurance Brokers & Agents of the West general counsel.

Mr. Garamendi proposed the legislation after New York Attorney General Eliot Spitzer in October of 2004 revealed an investigation found evidence that commercial brokers were involved with insurers in bid rigging and price fixing in exchange for incentive fees to improperly steer clients.

Even before the fiduciary requirement bill came up for a panel vote, its sponsor offered to gut it in favor of a bill that required simply more disclosure. But that was rejected by a 5-2 vote of the Senate Banking, Finance and Insurance Committee.

The National Association of Insurance Commissioners and the National Conference of Insurance Legislators have for the most part settled on model legislation that relies solely on disclosure by brokers compensated by both the insurer and the insured.

But so far no states have enacted either of those two models.

Mr. Young said that under the defeated California measure, producers would have been required to disclose the number of competing insurance quotations the producers intended to obtain on the client's behalf.

"On every quote obtained, the producer would have also been required to indicate the quote amount, the rating of the insurer, and whether or not the producer recommended the insurer," he said.

That same panel is also considering proposed regulations that would require brokers and agents to make significant disclosures regarding compensation.

Ken Nigohosian, executive director of the Lav Verne, Calif.-based American Agents Alliance, said of the committee vote, "Unfortunately this is not the end of the story," noting that Mr. Garamendi has proposed departmental agent-broker fiduciary regulations.

He promised his group would "continue to battle against the commissioner's apparent quest to eradicate non-existent problems in the insurance industry."

Article updated 9:24 a.m.

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Calif. Senate Panel Nixes Broker Fiduciary Bill

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