The Property Casualty Insurers Association of America has released a statement, indicating that the action of regulators to delay consideration of one critical section of the proposed amendment to its Producer Licensing Model Act was “a step in the right direction,” but the PCI still has concerns regarding the application of the other sections.
The bulletin noted that the National Association of Insurance Commissioners has “adopted the Compensation Disclosure Amendment to the Producer Licensing Model Act, but held consideration of Section B in abeyance, sending it back to the task force to be reviewed and possibly reworked.”
The PCI described Section B in its present form, as requiring “disclosure by all producers, including independent agents and salaried employees of direct response companies. The PCI and other insurance associations, have criticized the proposed regulation as “being too inclusive and casting an overly wide net that goes far beyond the problem at hand.”
The bulletin indicated that in delaying action, “several commissioners echoed concerns expressed by PCI regarding the broad application and the impact of imposing costly and unnecessary new disclosure requirements on every insurance producer. In returning the section to the task force for further deliberation, the commissioners indicated a desire to also address other issues including the imposition of fiduciary standards and requirements to disclose each quote received.”
It also explained that the amendments to the existing NAIC Producer Licensing Model Act represent an attempt to tighten requirements for insurance producers in response to allegations of bid-rigging and market manipulation leveled by New York Attorney General Eliot Spitzer.
The PCI recognized that the delay in approval of Section B “represents a significant process,” but expressed “lingering concerns” about the form of the amendment as drafted. “For example, the wording of Section A (2) may open the door for some commissioners to interpret these requirements as broadly applying to all producers, including captive agents and direct response insurers,” stated Robert Zeman, PCI senior vice president, industry and regulatory affairs.
The PCI stressed that throughout the debate it has “supported, and urged regulators to focus on, targeted and relevant disclosures by brokers, to address the specific issues uncovered by the ongoing investigations. The requirements for written consent and disclosures of specific compensation amounts and methodologies, coupled with the potential for overly broad application, fail to meet these goals.”
Zeman said that he is aware of the pressure for NAIC to act quickly in order to provide guidance to state legislatures as the 2005 sessions begin in January. “It will now fall to state legislatures to address this issue,” he noted. “PCI is committed to working with lawmakers so that statutes will truly reflect the needs of consumers and insurers doing business in their states. PCI will also work with the NAIC during further consideration of Section B and other issues referred back to the task force,” he concluded.