NAIC Moving MGA Model Law

The model act now goes up to the Market Regulation and Consumer Affairs D Committee for consideration.

After taking comments from interested members of the insurance industry, the Working Group quickly adopted several changes to the wording of the model legislation.

First, the Working Group decided against any further language changes for an exception in the statute's section which requires MGAs to have on file independent audited annual financial statements for the two most recent fiscal years to prove that they have a positive net worth.

Instead, the Working Group chose to include a drafting note for use in interpreting the exceptions. The draft makes clear that MGAs can submit other specified proof of positive net worth.

The Working Group also decided that a drafting note was sufficient to recognize that an MGA is not a position but an acquired status

A provision dealing with notices to the insurance regulator when insurers enter into or terminate contracts with MGAs was changed to delete reference to "appointment of an MGA."

The regulators said the revised language should eliminate confusion.

Also the group decided that the act would not apply to activity involving claims with dollar amounts below $10,000.

Co-chairman Eugene Reed Jr., director of licensing and consumer services for the Delaware insurance department, said now that the MGA model act has been voted out, any further work by the Working Group is deferred until 2003.

Sam A. Meyer, assistant director and supervisor of producer licensing for the South Dakota insurance division, the panel's other co-chairman, stressed that there are still several issues requiring resolution.

One of these is the elimination of hard-copy letters of certification.

A Working Group survey showed that despite the accessibility of the electronic Producer Data Bank, the insurance departments of several states persist in requiring non-resident producer applicants to provide a hard copy of their home-state certification.

Mr. Meyer said that appears to be essentially a product of habit. Some insurance department staffs, he said, have been dealing with hard copies for many years and are comfortable continuing the practice.

Mr. Meyer urged regulators to point out the convenience of merely scrolling down a computer screen to verify home-state licensing and to encourage their staff to use the PDB.