Brokers To Ask Regulators To Allow Incentive Pay

The industry comments will come in response to an NAIC proposal released on Nov. 16 to deal with alleged market manipulation and fee abuse being investigated by New York, Connecticut, California and other states. The NAIC reportedly wants to complete work as soon as possible on an amendment to its Producer Licensing Model Act so state regulators can show they are acting promptly and decisively to address the issues being probed.

The NAIC proposal says that "any insurance producer," whether broker or agent, would not be allowed to receive any payments from a carrier unless it is disclosed in advance to the insured and the insured has agreed–in writing–to the payment. Industry comments are due by Dec. 1 and a public hearing will be held on Dec. 4 as part of the NAIC's quarterly meeting in New Orleans.

The NAIC initiative is also important to the industry, which is looking to head off more extreme reactions. For example, in testimony before a U.S. Senate panel, a representative of the Risk and Insurance Management Society said the corporate insurance buyer group would support the elimination of all contingent compensation arrangements.

Julie Gackenbach, vice president for federal government affairs at the Property Casualty Insurers Association of America, said she believes the NAIC "will come very close" to finishing up its work on the new regulation before its December meeting ends. "The ability to respond appropriately and in a timely way by state regulators is needed to demonstrate their ability to effectively oversee the industry," she said, adding that regulators are looking to prove themselves to Congress and consumers as well as the industry.