Recent Calif. Regulator Actions Create Insurance Agent/Broker Concerns

January 7, 2011

Reflecting on Calif. Insurance Commissioner Dave Jones’ recent emergency order to enforce medical loss ratio rules requiring insurers to limit the percentage of premium revenue spent on reimbursement for “non-claim costs,” Kevin Baker of San Jose, Calif.-based Suhr Risk Services, said, “Agents and brokers should be very concerned about the intentions of Insurance Commissioner Jones and how his administration will affect our businesses.”

While Jones’ rule needs to be approved by the state Office of Administrative Law, Baker nonetheless said the MLR rule is controversial in the insurance industry, because insurance agent commissions are not excluded from the calculation.

The Independent Insurance Agents & Brokers of America (Big “I”) has argued that these agent commissions are passed 100 percent to third parties and are therefore pass-through payments that should not be included in the formula.

Baker, who also is the outgoing president of the Insurance Brokers and Agents of the West (IBA West), said, “We need members to step up and support IBA West’s advocacy efforts and others should consider joining IBA West to ensure that our message continues to be heard in Sacramento.”

Baker will hand over the association’s leadership position to Tim Manaka, the association’s president-elect, at the IBA West Annual Meeting & Installation Luncheon on January 26 in Pasadena, Calif. Looking back at 2009 and 2010, he said “the great recession” took its toll on his organization’s members and their clients. He noted that California has the third highest unemployment rate and the nation’s second highest foreclosure rate. “Those add up to make for a difficult business environment,” he said.

Thus, he said education and advocacy will be key to insurance agents’ and brokers’ livelihoods.

Topics California Agencies

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