American Agents Alliance Comments on CDI’s Amendment of Agency Appointment Regulations

Thanks to the pressure applied by the American Agents Alliance and its association partners, the California Department of Insurance has amended its proposed regulations dealing with the electronic reporting of agency appointments.

Alliance Executive Director Ken Nigohosian said, “The change is a step in the right direction, but the association still believes the Insurance Commissioner does not have the authority to bypass the Legislature in order to initiate regulations that impact Insurance Codes.”

Under the initial version of the proposed regulation, the insurer would be required to provide an explanation if the termination was “for cause.” Under the new draft, the “for cause” requirement for the written explanation was changed in Section 2194.43(a) to “may have violated the Insurance Code.”

Alliance counsel Bob Hogeboom said, “The only authority for disclosure of terminations is contained in Codes 1729.2 and 1723, which deal with certain prescribed convictions and administrative proceedings. We believe this is a legislative matter.”

Hogeboom also notes that the regulation would lead to wrongful termination litigation between agents and insurers.

Hogeboom said, “The DOI staff explained that the intent of the regulations is to make the reporting of agency appointments and terminations more efficient by requiring all carriers to submit the changes electronically. However, the DOI took it one step too far by requiring an explanation if termination was ‘for cause.’”

The Alliance remains concerned that the proposed regulations lump all agents and brokers together as “producers” — a move that could blur the lines between a broker and an agent.