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NAIC to Work on Initiative to Prevent Co-Mingling of Premium Funds by Agents

At a meeting of the NAIC's Antifraud Task Force in San Diego, the task force revealed plans to take up an initiative of drafting a...
December 9, 2002

At a meeting of the NAIC's Antifraud Task Force in San Diego, the task force revealed plans to take up an initiative of drafting a model law which would prevent co-mingling of premium funds by agents and force them to keep separate accounts.

The push for such an initiative was precipitated by recent case decisions, in states that permit co-mingling, where agents had directed premium funds for their personal use. PIA consulted with the anti-fraud task force and recommended that they look to New York's statute regarding agent accounts. New York permits agents to keep a premium "pass through" account, which avoids the potential legal complications created by using the language of "trust" or "in-trust" accounts. These phrases (i.e., "trust" or "in trust") have very defined meanings within the banking industry and PIA wants to avoid the application of these definitions to agents.

What It Means to Agents:  PIA will continue to give input to the anti-fraud task force as it begins drafting this model law to ensure that better fraud-preventing agent accounting measures are advocated, but that such measures do not impose cumbersome accounting duties on agents.

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