View this article online: https://www.insurancejournal.com/news/west/2005/02/03/50701.htm
The Property Casualty Insurers Association of America (PCI) is urging Nevada’s Division of Insurance to redraft a proposed regulation so that the regulation focuses on reasonable and meaningful disclosure of broker compensation arrangements.
Noting that the regulation was the subject of a public hearing Thursday, PCI Regional Vice President Sam Sorich stressed that the new rules should apply only to brokers and that a “bright line” test be established.
He said that it’s understandable in the wake of illegal bid-rigging allegations arising from New York Attorney General Eliot Spitzer’s investigations that state insurance regulators want to respond quickly to restore consumer confidence in the insurance industry.
PCI supports the general disclosure of broker compensation and believes that such disclosure is an important component of open, fair and well-regulated markets. However, the disclosure regulation, as proposed in Nevada, could be read to apply to agents. Agent compensation has not been the subject of allegations of wrongdoing. Agents represent one or several companies and are compensated by the insurers. Both the clients and insurers, on the other hand, may pay brokers.
“PCI’s position is that broker disclosure requirements should be guided by a bright-line test. If the broker receives compensation from both the client and an insurer, the broker should be required to disclose to the client the fact that the broker is receiving compensation from an insurer,” said Sorich in testimony prepared for Thursday’s hearing.
He added that PCI “urges the Division of Insurance to redraft the regulation so that the regulation focuses on brokers, as defined by the Nevada Insurance Code, and limits its requirements to reasonable and meaningful disclosure of broker compensation arrangements.”