California Insurance Commissioner John Garamendi said on Wednesday that he will delay developing new regulations imposing fiduciary duties and disclosure obligations on agents and brokers in the wake of guidelines unveiled by the Insurance Brokers and Agents of the West.
"We have been working with IBA West and others in the insurance industry to encourage changes in the practices of agents and brokers that will prevent steering and bid-rigging," Mr. Garamendi said. "We have also stressed the obligation that all insurance professionals have to fully disclose any manner in which their compensation might influence the recommendations they provide to their customers."
The issue has been contested between the insurance industry and the state since Mr. Garamendi announced a proposed set of regulations imposing fiduciary duties on agents and brokers last November. That proposal, and a similar revised version offered earlier this year, was defeated largely due to efforts by IBA West and others agent and insurer groups.
With the proposed guide, however, the California Department of Insurance said IBA West made "a significant step forward" on the issue, and that if adopted it would help ensure that customers receive important information on the services an agent or broker provides and the compensation they will receive.
The guide suggests that agents disclose the source and type of any compensation they may receive, including contingent compensation and how that would be obtained. The guide also suggests agents notify customers if they plan to seek quotes from more than one insurer and provide information about all quotes obtained. They need to disclose if compensation they may receive from one insurer for offering a quote is greater than that of another.
"The Department of Insurance will watch carefully to see whether the various efforts to deal with this problem, including the suggestions contained in IBA West's Guide, are widely adopted by agents and brokers, and what benefits they provide to consumers," Mr. Garamendi said.
"In addition, we are continuing with our investigation and will bring enforcement actions against any agents, brokers or insurers we find to have violated the law by bid-rigging, steering or failing to disclose material information to consumers."
IBA West said the guide is being discussed in "town hall" style meetings throughout the state and has been welcomed by agents and brokers.
"Members recognize that the business and legal environments are changing, and that greater disclosure can be beneficial not only for consumers but also for agents and brokers," said IBA West CEO Clark Payan. "As members come to understand these issues, they recognize the desirability of taking affirmative actions."
Should the guide be accepted, and its suggestions followed, Mr. Garamendi said it is unlikely the state would take further action.
"If the industry is able to correct this problem on its own, we do not need regulations," he said. "We will monitor the industry closely to determine whether further regulatory action is needed to fully protect consumers."
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