Recent investigations by state and federal regulators have led the insurance industry to turn away from the use of controversial "contingent commissions" that compensated insurance brokers for bringing to insurers risks meeting certain volume or profitability goals.
At a recent Standard & Poor's conference, brokerage executives were quoted as expecting greater transparency coming as a result of the recent investigations. That transparency will include the disclosure of the higher commissions brokers are negotiating. Source: S&P Conference: With End of Contingent Commissions, Brokers Find Ways to Plug the Hole Insurance Journal, June 14, 2005.
Increased disclosure to insurance purchasers of all compensation received from insurance companies by agents and brokers is a key goal of model laws proposed by the National Association of Insurance Commissioners (NAIC). Any such law and implementing regulation would have to be enacted by each state's legislative and regulatory authority individually. The NAIC has no power beyond persuasion.
The NAIC model law is not without controversy. In November of 2004, Connecticut Attorney General Richard Blumenthal called the model law "a shadow of what it should be," that "fails to address the key defects in the current system." See: Unintended Consequences: NAIC Model Law on Broker Disclosures Criticized by CT A.G. Blumenthal (November 17, 2004). See also: Unintended Consequences: Testimony to Senate Panel on Insurance Brokers (November 17, 2005).
Posted by dougsimpson at June 15, 2005 08:47 PM