RIMs Would Back Ban On PSA Fee Deals

RIMs Would Back Ban On PSA Fee Deals

By Arthur D. Postal, Washington Bureau Chief

NU Online News Service, Nov. 17, 8:50 a.m. EST, Washington?A top official of the Risk and Insurance Management Society testified yesterdaybefore a Senate subcommittee that it would support implementation of a model law requiring disclosure of all insurance broker fees, and would back an outright ban on placement service agreements.[@@]

The disclosure model has been proposed by the National Association of Insurance Commissioners as a means of appropriately addressing broker-insurer fee irregularities alleged in lawsuits filed by New York Attorney General Eliot Spitzer.

In her testimony, Janice Ochenkowski, vice-president of external affairs for RIMS, also said RIMS and its members were "shocked" by recent allegations of illegal activities by certain brokers and insurance companies in the placement of insurance contracts.

"We have been particularly distressed by the findings and allegations by Mr. Spitzer that insurance brokers have violated their position as a trusted advisor to their clients by steering clients to favored insurance companies and engaging in bid-rigging schemes," she added.

"These allegations have not only undermined the broker/client relationship, but they also have wider implications for the industry as a whole," Ms. Ochenkowski said. "Any penalties that may ultimately be levied against the companies involved should be used to offset consumer losses that have resulted from these deceptive practices," she added.

"As the facts are becoming known and the investigation into placement service agreements continues, in an effort to address the potential conflict-of-interest issue, RIMS would support a prohibition on the use of placement service agreements by insurers and brokers," she noted in her testimony.

Ms. Ochenkowski was on the second of two panels that testified on "Insurance Brokerage Practices, Including Potential Conflicts of Interest and the Adequacy of the Current Regulatory Framework" before a subcommittee of the Senate Governmental Affairs. The oversight hearing was convened by the Committee's Subcommittee on Financial Management, the Budget, and International Security. The chairman of the subcommittee is Sen. Peter Fitzgerald, R-Ill.

Regarding the NAIC proposal, which includes provisions for producers to gain permission in writing from their clients to receive compensation relating to the transactions from an insurer, Ms. Ochenkowski said that "RIMS believes that a national, uniform approach should be taken to address this issue. Regulatory clarity and uniformity are needed, not 51 different approaches."