Posted on 11 Jan 05
The National Association of Professional Insurance Agents reiterated its opposition to the version of a compensation disclosure model law that was passed by a vote of 30-15 (with three abstentions) on Dec. 29, 2004, by the National Association of Insurance Commissioners and vowed to continue working to secure changes to improve the model.
"It would be unfair to the NAIC, and we would be untrue to our principles, if we were to say or imply that we do not oppose this model as it is currently constituted," declared PIA National Executive Vice President and CEO Len Brevik. "We do not support this model, we oppose it. PIA will now work to improve a bad result."
Brevik said PIA National and the PIA state and regional affiliate organizations stand united in opposition to the model as passed, and will exercise that opposition at the both the state and the federal levels.
PIA appreciates the efforts of NAIC drafters to respond to some of the issues of concern PIA raised, especially as reflected in the draft circulated on December 27, but the model still casts a wide net to include all insurance-brokered transactions, whether or not the insurance producer collects from both sides. In addition, PIA believes the model still has numerous deficiencies that need to be corrected, including:
Improving the distinction between independent agents and brokers.
Requirements for disclosure still need clarification. The current language of the NAIC model poses considerable functional challenges for execution by insurance producers and insurers in the everyday business transactions between and among customers, producers, affiliates, third-parties and insurers.
A better definition of the kinds of "insurance placements" covered by the model is needed. As currently worded, the unlimited phrase will create a compliance nightmare, requiring a separate action to comply each and every time a brokered insurance placement of insurance is made - even during the course of the insurance policy period, i.e. - (1) at the initial placement; (2) at the renewal of an insurance policy; and (3) every time a vehicle is added to the C/L Auto schedule or a new employee is added to a existing employer benefits plans in life or health.
Additional technical changes are needed.
The NAIC Task Force has stated it will evaluate the results of letters of inquiry and data surveys issued by state departments of insurance, to determine if additional requirements must be imposed in Subsection (B) of the draft model, on which it will act within 90 days.
"The actual language of these state surveys - together with this expansive NAIC model - seem to reflect that the NAIC and some state DOIs believe that what New York Attorney General Eliot Spitzer thinks he uncovered in New York is indicative of a widespread market problem among all insurance producers and carriers' business dealings that goes back to 1998," said PIA Senior Vice President Patricia A. Borowski. "That is untrue and unfounded."
Brevik said the model passed by the NAIC attempts to craft a solution to the problem of alleged bid rigging at several major Fortune 500 brokerage firms, but then over-reaches by imposing broad disclosure requirements on the entire retail sector. The PIA claims it places unclear and potentially onerous compliance burdens on independent insurance agencies and treats all compensation earned by independent agents for providing their customers with choices as potential conflicts-of-interest.
"On such a serious matter deserving of serious attention, public policy should be based on common-sense solutions to real problems, not on unfounded suspicions," Brevik said. "Choice is not a conflict and compensation is not a dirty word, unless one believes that consumers should not have choices. And those w