IIABA Opposes NAIC Broker Disclosure Model

Discussing the proposed new broker fee language for the NAIC's Producer Licensing Model Act, Mr. Rusbuldt wrote that it would "impose unnecessary generic disclosure obligations on every insurance agent in the country and offer questionable benefit to consumers in the process."

The letter continued: "No rationale, justification or need for this subsection has been presented, and we urge the nation's insurance commissioners to reject the application of these needless costs and burdensome new requirements to hundreds of millions of insurance transactions that take place every year."

Earlier this month, the National Association of Professional Insurance Agents complained of "an expansive model that is creating widespread confusion, making implementation by the states difficult and compliance problematical at best."

IIABA Senior Vice President Wes Bissett said his group would also not support passage of the current model in the states, but feels by the time any such legislation is introduced, it could be modified enough to gain IIABA support.

As for the proposed expansion, he pointed out that during a conference call for regulators, "this was pushed for primarily by those large states that generally don't support NAIC models anyhow."

During the initial debates, Audrey Samers, the New York Insurance Department general counsel, urged inclusion of all producers due to the fact that irregularities bared by the New York probes were not limited to those client-compensated brokers.

The NAIC passed a model amendment to the producer licensing act on Dec. 29 that is limited to those brokers who are compensated by the insured and requires them to disclose any compensation they may receive from an insurance carrier.

The action came in the aftermath of a civil action by New York Attorney General Eliot Spitzer, which accuses Marsh brokerage of rigging bids, fixing prices and steering customers to insurers who made payoffs which were referred to as contingency compensation arrangements and by other names.

At the time, the commissioners considered a provision that would require disclosure by all producers of the forms of compensation they receive.

But they put off that so-called Subsection B proposal for at least 90 days while they evaluate the results of letters of inquiry and data surveys issued by state departments of insurance to see if it is needed.

Independent agents take part in profit-sharing arrangements with their carriers over and above their traditional fee. But, they consider these different in form and substance from the so-called Market Service Agreements the top brokerage firms commanded and which are at the heart of the current scandal.