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December 6, 2004,
Insurance Journal
The
National Association of Insurance Commissioners' Executive Task Force on
Broker Activities heard a consensus from industry and producers that
while remedies were needed, the initiatives suggested so far were overly
broad and do not reflect the way business is actually conducted.
Testifying
before the task force, NAMIC's Director of Legal and Regulatory Affairs
Peter Bisbecos said that any resolution should be narrowly drawn and
ultimately guarantee access to vibrant and competitive markets. He noted
that since the whole of the problem is not clearly defined, arriving at
a solution at this point is premature and further deliberation is
required.
Bisbecos
offered two points as evidence of the need for a more deliberative pace.
First, he noted that there was no clear standard by which to prove the
fraud that has been alleged.
Some
have suggested that absent disclosure, it could be fraudulent for a
broker to provide multiple quotes to a consumer if all quotes are from
insurers who pay the broker commissions, and none are from companies
that do not. Bisbecos noted that it is unknown if producers would have
to check with 10, 20 or 30 companies aside from those that normally pay
them commissions and that this lack of clarity would lead to extensive
civil litigation. Additionally, not clarifying what constitutes a
criminal offense might well be constitutionally vague, according to
Bisbecos in response to allegations of criminal activity.
Bisbecos
also noted that companies receiving interrogatories from the states
don't yet know the authority under which these demands for information
are issued, or the degree of confidentiality attached to the information
that companies will be sending in response. This fundamental issue must
be resolved at the outset, Bisbecos said. He concluded by noting these
two concerns, along with NAMIC's previously filed testimony and the
testimony of producers and insurers prove the need to slow the process
down so that proper deliberation could occur.
The
NAIC hearing was initially scheduled to take comment on proposed
amendments to the Producer Licensing Model Act, amendments that would
require disclosure of broker and agent compensation. The scope of the
hearing was subsequently broadened to include any comments on their
entire response - including the questions that are being sent to
insurers by the insurance departments.
The
hearing began with a presentation by Gary Cohen, the General Counsel for
the California Department, who discussed his department's concerns and
how the model addressed those concerns. Cohen asserted that the problem
is much broader than that revealed by the New York lawsuits and that it
is not yet fully defined. For instance, Cohen argued that even captive
agents should be required to disclose because they might be required to
sell other products to certain customers and consumers should know about
various commission levels so that they could make a fully informed
decision.
Following
this presentation, three panels were called to testify. The first panel
consisted of NAIC funded consumer representatives. The second panel
consisted of agents and brokers. While perspective varied widely, and
various corrective proposals were suggested, there was general agreement
on several points:
·
Reasonable and appropriate disclosure is desirable.
·
The proposed amendments to the model are too broad.
·
It is unclear how notice to policyholders would be accomplished.
·
The proposed amendments do not reflect the way in which business is done
by producers.
The
insurer panel on which Bisbecos participated followed. General points of
agreement were that:
·
Agreement with the general points, above, raised by producers.
·
That the states should do a better job of coordinating their
interrogatory process as it does not appear to be uniform.
·
That more deliberate consideration of this problem is required.
The
NAIC has said that it wants to have a final decision on the amendments
to the Producer Licensing model by the end of the year. Future action
beyond that point remains unclear. |