The NAIC has adopted model legislation that would implement new disclosure requirements designed to ensure consumers are provided the information necessary to understand the manner in which brokers are compensated for the sale of insurance products. The model legislation amends the NAIC's current Producer Licensing Model Act and is a key component of an aggressive initiative by state insurance regulators to address issues surrounding the use of compensation arrangements by insurance brokers.
During a conference call of its membership, commissioners also directed the NAIC Executive Task Force on Broker Activities to give further consideration to the development of additional requirements, such as recognition of a fiduciary responsibility of producers, disclosure of all quotes received by a broker, and disclosures relating to agent-owned reinsurance arrangements.
"We made a promise to consumers and industry to get to the bottom of this matter as quickly as possible, resolving to develop and put into place a tangible action plan for state insurance regulators," said NAIC President/Pennsylvania Insurance Commissioner Diane Koken, who also chairs the task force. "With passage of this model legislation, we are delivering on that promise."
The action emanates from the work of the NAIC Executive Task Force on Broker Activities, whose members have moved quickly to implement a three-part action plan that includes creating more transparency for insurance consumers through better disclosure of broker compensation arrangements; continuing to help state insurance regulators coordinate efforts to address improper conduct by brokers and insurers through investigation and collection of relevant information; and the implementation of a new on-line fraud reporting system.
Among the requirements contained in the model legislation, brokers would be required to disclose the amount of compensation from the insurer and the method for calculating the compensation, including any contingent compensation. In those cases where the contingent commission is not known, brokers would be required to provide a reasonable estimate of the amount and method for calculating such compensation. Producers who represent companies and do not receive compensation from customers would have a duty to disclose that relationship in certain circumstances.
A draft of the model legislation is available for review on the NAIC home page at www.naic.org.
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access