Insurers Consider NAIC Broker Compensation Disclosure Amendment Overbroad

The National Association of Mutual Insurance Companies (NAMIC) said it has sent a letter to NAIC President Diane Koken, who also serves as chair of the executive task force on broker activities, to reaffirm its view of the NAIC’s Compensation Disclosure amendment.

“Overall, we continue to view the Compensation Disclosure Amendment, as adopted, as being overbroad, confusing and ambiguous, and of limited value to the consumers it is intended to protect,” wrote NAMIC State Affairs Manager Christian John Rataj on Monday.

Rataj’s letter tendered supplemental comments addressing certain issues that remained outstanding at the time of the adoption by the NAIC of the Compensation Disclosure Amendment.

NAMIC contends that any model act adopted by the NAIC should: a) be grounded in logic and reason, not fear and speculation; b) be realistic in scope and practical in application; c) be narrowly tailored to the objective of preventing conflicts of interest; and d) be mindful of the fact that a well drafted regulation should always balance the needs of the consumer with the needs of the insurance industry.

NAMIC’s hope is that the NAIC will consider narrowing the scope of the Amendment so that it addresses only the issue of “actual” conflict of interest situations, i.e. where a producer is being compensated by both the customer and the insurer or other source. Short of those changes, however, NAMIC urges the NAIC to adopt the March 5, 2005, NCOIL Producer Compensation Disclosure Model Amendment to the Producer Licensing Model Act, and add no additional disclosure requirements to the Amendment.

NAMIC’s supplemental responses to the six individual questions can be read on NAMIC’s Web site.