Agents’ opposition to portions of a proposed class settlement with Zurich Insurance has deepened with the filing by the Independent Insurance Agents & Brokers of America (Big “I”) of an amicus curiae brief in the U.S. District Court for the District of New Jersey.
The National Association of Professional Insurance Agents also filed a brief against segments of the Zurich settlement.
Agents oppose having to inform their customers of Zurich’s compensation practices, and also object to other conditions set forth in the pact.
“The Big ‘I’ supports transparency in insurance transactions but is opposed to the portion of the settlement that would require independent insurance agents and brokers to implement for Zurich its obligation under the settlement to provide to insureds a form describing the company’s practices in compensating agents and brokers,” said Big “I” President Alex Soto, also president of Miami, Fla. based InSource, Inc.
He said the Big I’s brief also explains his group’s “strong support for incentive compensation and opposition to any prohibition on the payment of legal incentive compensation to agents and brokers.”
“Zurich should have the responsibility to provide to insureds any disclosure form it is obligated by law or otherwise chooses to provide about how it compensates agents and brokers,” added Big “I” CEO Robert A. Rusbuldt. “Agents and brokers should continue to have the latitude to customize their interactions to the specific requests and needs of customers.”
According to Soto, singling out disclosure of agent and broker compensation in the manner provided in the Zurich settlement does not provide the consumer with sufficient transparency regarding the cost of the insurance transaction.
Agents are also fearful that the Zurich model might become the industry norm.
“If other carriers follow the Zurich settlement approach of requiring agents and brokers to implement carrier compensation disclosures, the multitude of forms will exacerbate consumer confusion significantly, and create inefficiencies in independent agencies,” said Rusbuldt, who maintained that this would be magnified even further for complex coverage involving layers of coverage from different carriers. In effect, he said, customers would become inundated with varying disclosures, which will be impossible to compare and understand, leading them to ignore the disclosures altogether.
“If disclosures about compensation or any other aspect of insurance transactions are not easily understood by customers or are ignored, the transparency intended to promote greater consumer understanding of insurance transactions and costs would be entirely frustrated,” noted Debra L. Perkins, Big “I” executive vice president and general counsel.
According to Perkins, greater efficiency and effectiveness in monitoring compliance with the disclosure obligation would be achieved by having it implemented by the company. This approach would also allow regulators and the court to easily monitor compliance and address noncompliance since many brokers and agents who sell Zurich’s products around the country may not be subject to the court’s jurisdiction.
“In addition, none of the measures in this settlement agreement pending before the court, or any of the other settlements between carriers and regulators that are currently public, have yet addressed compensation transparency for consumers when they purchase insurance from captive agents or directly from insurance companies,” added Soto.
The Big “I” also opposes the ban on Zurich’s payment of incentive compensation to agents and brokers in the future if 65 percent of the insurance companies in the marketplace do not pay incentive compensation for a product, line or segment of business.
“This limitation, if put in place, will harm consumers by making it more difficult for some Main Street agents to remain in business, which will decrease competition and lead to higher prices, especially in rural and underserved markets where these agencies are a primary channel for the distribution of insurance, ” added Rusbuldt.
Ultimately it is not for state attorneys general who created the 65 percent threshold to determine whether carriers should be permitted to offer legal incentive compensation to agents and brokers or how it should be disclosed to consumers, the IIABA argues.
Agents have noted that all settlement negotiations between carriers, regulators and attorneys general have been conducted privately and without agents being permitted to directly voice concerns about certain terms.
The complete brief can be erad at www.independentagent.com.