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PIA National Introduces Public Policy Guide on Compensation at Senate Governmental Affairs Committee Hearing

WASHINGTON, November 16, 2004 - The National Association of Professional Insurance Agents (PIA) has issued a public policy guide on broker disclosures and...
November 16, 2004

WASHINGTON, November 16, 2004  - The National Association of Professional Insurance Agents (PIA) has issued a public policy guide on broker disclosures and compensation, introducing it as testimony submitted at today's hearing by the Senate Committee on Governmental Affairs. The guide has also been shared with state lawmakers and all state insurance commissioners.

In the document, PIA outlines its support for a model regulation that can be adopted by states across the country to require disclosure of fees charged, services provided and compensations received by a broker that takes compensation from an insured and an insurer in the same transaction. The guide also provides a broad overview of compensation issues.

"Compensation is not the problem, illegal activities are the problem," said PIA National executive vice president and CEO Len Brevik. "PIA condemns illegal actions such as bid-rigging, allegations of which have been the focus of recent investigations. Those found guilty of such abuses belong in jail. But in the effort to come up with new regulations to make such abuses less likely, policymakers should exercise care to encourage competition in the marketplace, not to restrict it."   

PIA's release of the policy guide follows the formation by the National Association of Insurance Commissioners (NAIC) of a new executive task force on broker activities that is gathering facts and coordinating the development of public policy in the wake of recent actions by New York Attorney General Eliot Spitzer.

"Broad issues of public policy are being raised in the wake of alleged wrongdoing by a major insurance broker," said PIA National executive vice president and CEO Len Brevik. "Regrettably, some of those reporting and offering commentary on these matters in insurance are painting all producers and carriers with a broad brush and confusing the sharp differences that exist in our business among various compensation arrangements."

"In addition, we are amazed at how many people, speaking with what appears to be scant knowledge of the insurance industry as a whole, have cited the Spitzer actions to assert that state oversight of insurance is a failure and that federal regulation should be considered," Brevik said. "PIA disagrees. Mr. Spitzer's probe proves that state oversight of insurance is working quite well.  Investigations were conducted, lawsuits were filed and allegations of illegal activities were aggressively pursued - all by state authorities, acting under state law."

"In the war against fraud and abuse, state authorities are our nation's first responders, and not just in insurance," Brevik added. "State regulation is best because it is closest to consumers and much more responsive. Previous investigations involving securities and savings and loans began on the state level. Regulation is an effective tool to encourage good behavior, however no regulation itself -- state or federal - will ever turn sinners into saints. But effective state-based regulation and enforcement will uncover and punish wrongdoers."

Brevik said policymakers must understand the difference between the large Wall Street-type insurance brokers that have been investigated by Spitzer and local, retail independent insurance agents across the nation.  In addition, he said there is widespread confusion between the compensation arrangements provided independent insurance agencies in the retail marketplace by their insurers, and the individually negotiated and designed placement service agreements (PSAs) developed by insurers with large brokers.

"PIA members are independent insurance agencies serving the retail direct admitted marketplace for individuals' needs in the personal lines and small-to-mid-size commercial market for property and casualty insurance, " Brevik said. "They are the owners small-to-midsize independent insurance businesses located in communities of all sizes across the nation. As our motto says, we are 'Main Street, not Wall Street.' Our members should not be painted with the same brush as large Wall Street brokers."

The PIA policy guide also advises the NAIC to look to existing regulations adopted by various state departments of insurance as a starting point for reforms that can be enacted as part of a model regulation to be adopted first by NAIC, and then moved to adoption in all states.

"PIA National encourages state lawmakers to take stock of what has been previously adopted by state insurance departments for their use in addressing similar issues in other parts of the marketplace," said PIA National senior vice president Patricia A. Borowski. "These provide a good starting point for drafting public policy responding to these recent matters."

PIA has launched a coordinated effort designed to ensure that enacted responses are balanced, effective, address the central issues of concern, originate from the states and protect consumers without stifling competition in the marketplace.

"In light of recent events, a sense of urgency has developed to craft a public policy response," Borowski noted. "PIA National believes it is critical that this urgency be tempered to allow for sufficient deliberation. Significant confusion now exists regarding certain aspects that are being included in these ongoing policy discussions. It is necessary to clear up this confusion first, so that successful responses to the regulatory issues at hand can be crafted."

The PIA public policy guide is being distributed to key Members of Congress the NAIC and state lawmakers.  On Friday, November 12, PIA National attended a meeting arranged by PIA's affiliate in Pennsylvania, the Insurance Agents and Brokers (IA&B), with National Association of Insurance Commissioners (NAIC) President Diane Koken, who is Pennsylvania's insurance commissioner and chairs the NAIC Executive Task Force on Broker Activities.  The meeting followed a similar discussion held by PIA on Tuesday November 9 with Georgia Insurance Commissioner John W. Oxendine, one of 13 members of the task force. 

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. Visit PIA at

Download the PIA National Broker Disclosures and Compensation Policy Guide.