Consumer Group Slams NAIC Disclosure Rules
NU Online News Service, Jan. 3, 3:30 p.m. EST?The new producer compensation disclosure rules adopted by the National Association of Insurance Commissioners are being slammed by a consumer advocate as "full of loopholes" and ineffective in protecting consumers from abusive sales practices.[@@]
The NAIC, responding to allegations of broker bid-rigging and contingency fee abuse leveled by New York Attorney General Eliot Spitzer and others, voted during a Dec. 29 conference call to adopt the majority of the proposed compensation disclosure amendments to the group's model producer licensing act.
But Birny Birnbaum, executive director at the Austin, Texas-based consumer advocacy Center for Economic Justice, blasted the NAIC as having "failed in their stated goal" of bringing transparency to insurance markets with better disclosure of broker and agent compensation.
Mr. Birnbaum also criticized the NAIC's decision to defer one of the proposed sections for further study for the next 90 days. The deferred part, Section B, dealt with disclosures concerning a broader class of producers and has been strongly objected by some industry participants during the drafting of the amendment.
Mr. Birnbaum said, "After three months of meetings, hearings and discussions, the best the NAIC could come up with was to 'defer' consideration of the most meaningful consumer protections in the model."
Further, he also argued, the NAIC never gave serious discussion to a disclosure requirement for all brokers and agents, despite the fact that regulators in four of the five most populous states wanted far stronger disclosure and consumer protection.
"The model is so full of loopholes and exceptions that the only thing it will accomplish is changing the way that brokers and agents hide their incentives to sell various products," Mr. Birnbaum said.
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