Next month, a committee of the National Association of Insurance Commissioners (NAIC) is expected to consider the final draft of the Fiduciary Responsibility of Insurance Producers Model Act. The model act would criminalize the misappropriation of premium funds by producers and establish new requirements for the handling of premium dollars.

In the May issue of Best’s Review, PIA National Director of Business and Compliance Affairs, attorney Timothy Kovac, provides extensive comments and an analysis of the draft, which is currently being developed by the NAIC’s Producer Licensing Working Group.

Kovac noted the model act fails to understand how different producers work. For instance, in the independent agency system, there is the business entity itself, and those individual producers who work for the entity, he said. “The model sets requirements for individual producers but does not clarify that it is the producer entity in certain cases, not the individual producers that work for that agency, that have the compliance obligation, Kovac said. “Without making this distinction, the model is truly flawed.” Kovac noted that while PIA does not endorse the model act in its current form, the Working Group has been responsive to PIA’s concerns. “PIA is committed to working to improve the model. I'm hopeful that things will get turned around, but it's up in the air at this point,” he said.

A Criminal Question – Agent Groups Say Model is Flawed (Best’s Review, May 2005)

May 10, 2005