The Property Casualty Insurers Association of America commended the approach taken by the Nevada Division of Insurance on the disclosure of broker compensation in a temporary regulation adopted last week.
“Instead of overreacting to generalities and erroneous perceptions about the broker compensation issue, the Nevada Division of Insurance took a well-reasoned approach in crafting its temporary regulation,” said Sam Sorich, PCI vice president and western region manager.
“Appropriately, the temporary regulation applies only to brokers,” Sorich said. He added that public investigations of producer compensation have focused on brokers, not agents. Agents represent one or several companies and are compensated by the insurers. Brokers may be paid by both their clients and insurers.
Sorich said that the regulation, which is expected to go into effect soon, requires brokers to disclose to their clients that insurers may compensate brokers. The regulation also imposes on brokers a duty against placing their own financial interest above the clients’. Additionally, it requires brokers to disclose to clients the name of each insurer which supplied a quote.
The regulation is temporary and will be the subject of additional public policy consideration later this year.
In considering the regulation, the Division of Insurance conducted a three-hour workshop, followed by an hour-and-a-half hearing. The division considered all viewpoints and thoroughly analysed the issues before reaching a resolution.
“While PCI has concerns with some portions of the temporary regulation, overall we believe that the regulation is sound and represents good public policy,” Sorich said. “We look forward to working with Nevada regulators to iron out our concerns before the temporary regulation becomes permanent.”
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