California Agents Battle New Disclosure Proposal
Agent groups are mounting fierce opposition to legislation in California that they contend would require burdensome and needless disclosures to clients.
Senate Bill 938authored by Sen. Joseph Dunn, D-Garden Grovewould require agents and brokers to disclose all of their commissions and fees to consumers and also to obtain multiple quotes and explain them to buyers in detail.
The bill would also give the insurance commissioner authority to regulate broker fees to ensure they are commensurate with the services provided and that customers are charged similar fees for similar service.
Steve Young, vice president and general counsel of Insurance Brokers and Agents of the West, an affiliate of the Independent Insurance Agents & Brokers of America, said the group was very concerned about the bill, which is similar to regulations Insurance Commissioner John Garamendi tried to implement last year.
In regards to fees and commissions, consumers already know that agents and brokers make their living from fees and commissions, and if consumers really cared about that amount, they would be filing complaints by the thousands, said Clark Sitzes, executive vice president. of the Professional Insurance Agents Western Alliance.
Few complaints have been madeand certainly not enough to justify enacting the regulations imposed by SB 938, according to Mr. Sitzes. The only disclosure that is necessary to protect the consumer is when an agent or broker collects fees and commissions from both the client and the carrier, he said. That could be addressed in California regulations with a couple of sentences and not by implementing this complicated, ambiguous legislation.
Mr. Young said that neither Mr. Garamendi nor anyone else in the insurance department has shown even a marginally compelling need for increased disclosure, predicting this would hurt the bill's chances.
He added that the bill's quite radical, controversial and unprecedented provisions giving Mr. Garamendi rulemaking authority to implement the new disclosure requirements made it highly unlikely the bill will pass or even be voted on this year.
The new disclosures were proposed in the wake of abuses uncovered during investigations by Mr. Garamendi's office and New York Attorney General Eliot Spitzer. However, Mr. Sitzes noted, the abuses uncovered by those probes were committed at large firms and should not result in all producers carrying new burdens.
This is ridiculous, he said. The small agents and brokers in California are not mega-insurance brokerage houses. They do not have the leverage that Marsh or AIG have. Like most in insurance, they are honest professionals who work hard to get the best possible deal for their clients. These regulations are a knee-jerk reaction.
Reproduced from National Underwriter Edition, April 8, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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