N.J. Agents Oppose Surplus Lines Commission Disclosure Proposal

September 29, 2006

Agents in New Jersey are protesting a state proposal to require originating brokers making surplus lines placements to tell insureds they will receive a portion of the commission.

The Professional Insurance Agents of New Jersey Inc. President Andrew Anderson told the Department of Banking and Insurance during a recent meeting and in a written comment that the change would unnecessarily expand the current disclosure requirement.

“PIANJ opposes the new requirement because we do not believe there is a valid reason for requiring such a disclosure,” said Anderson. “It is an administrative burden being placed upon producers that will offer no benefit to the insurance consumers of this state.”

According to Anderson, New Jersey regulations already require producers who charge fees to insureds or applicants to disclose in the required written fee agreement whether the producer also will receive commissions from an insurer for the placement. The department’s proposal would take the current rule a step further by requiring originating brokers making surplus lines placements to inform the insured that the producer also will receive a commission from the surplus lines producer, even when the originating broker is not charging a fee to the insured.

Anderson asserted that the existing regulation is a reasonable approach to commission disclosure that need not be expanded.

In addition to proposing the new disclosure rule, the department is also proposing changes to the rules governing fees and commissions. These changes are meant to clarify the application of a statutory provision that limits the fees surplus lines producers may charge to originating brokers to $50, plus the actual costs incurred for services performed by a person not associated with the surplus lines producer, such as inspection services.

PIANJ has pointed out what it sees as several technical problems with the attempted clarification, which could create confusion for producers in interpreting the rules regarding permissible fees.

Source: PIANJ

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