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PIA National Encouraged by NCOIL Revised Broker Disclosure Model

WASHINGTON, March 7, 2005 - The National Association of Professional Insurance Agents (PIA) is encouraged by revisions to model legislation adopted March 5 at the...
March 7, 2005

Provisions of NCOIL Model are Superior to NAIC Model Opposed by PIA

WASHINGTON, March 7, 2005 - The National Association of Professional Insurance Agents (PIA) is encouraged by revisions to model legislation adopted March 5 at the spring meeting of the National Conference of Insurance Legislators (NCOIL) requiring insurance brokers that receive compensation from both the insurer and the customer in the same transaction to disclose this fact prior to making the placement.

"The NCOIL model on broker disclosure is a positive approach that concentrates on areas where conflicts of interest have been demonstrated to exist, and avoids causing problems where they do not," said Timothy K. Kovac, director of business and compliance affairs for PIA National. "PIA is encouraged by the NCOIL model amendment. It is a significant improvement over the model that was passed by the National Association of Insurance Commissioners (NAIC), which PIA opposes."

The focused approach of the NCOIL model also eliminates the need for the safe harbor provisions of the NAIC model, thereby providing clear direction to insurance producers operating in real-world situations. The NCOIL model similarly returns the documented acknowledgment required by the model to a true "acknowledgment" focused on the nature of each specific transaction, not the burdensome written consent required by the NAIC model. The NCOIL model also excludes from the mandatory disclosure requirements producers whose sole compensation for the placement of business comes from the insurer.

"While PIA is encouraged by the model passed by NCOIL, we do not believe that all states need to adopt it," noted Kovac. "PIA's position has always been that each state should carefully review its existing laws and evaluate whether a problem exists in their state. If current laws address the issue sufficiently, states should not introduce either the NAIC or the NCOIL model. However, for those states that find it necessary to introduce legislation, the NCOIL model is the only measure that provides clear, focused guidelines and should be the vehicle used."

The proposed NCOIL amendment would be tacked on to the amendment to the NAIC Producer Licensing Model Act that was approved in late December. The NAIC is set to meet in Salt Lake City, Utah on February 14 to consider amendments to its model.

PIA participated in the NCOIL hearings leading to the adoption of its model amendment, providing assistance in drafting the measure as well as preparing testimony in support of this alternative. PIA will also testify at next week's NAIC public hearing on the issue.

On December 29, the NAIC passed by a vote of 30-15 amendments to the producer modeling law outlining compensation disclosure procedures states can adopt. PIA opposed this model, faulting it for casting too wide a net to include all insurance transactions and failing to draw distinction between mega-brokers where alleged abuses detailed by New York Attorney General Eliot Spitzer have occurred, and Main Street professional insurance agents who have not been accused of such alleged wrongdoing.

"NCOIL's amendment is in line with recent remarks by New York Attorney General Eliot Spitzer, in which he cautions against jumping to conclusions and over-reacting to his highly-publicized lawsuits and settlements," noted Kovac.

During an interview on FOX News on February 15, Spitzer expressed confidence in the honesty of the vast majority of insurance brokers and agents. He also cautioned against making generalizations as a result of his investigations and said the insurance sector is "vitally important" to the economy.

"My overwhelming presumption and confidence is that the vast majority of insurance brokers and agents are honest, hardworking, good individuals," said Spitzer on a program hosted by Neil Cavuto. "I know, as every one of us does, many people who are in that profession, that they work hard. They work diligently. They look out for their clients. They do what is right."

"Those whom we have been prosecuting clearly were not in that category," Spitzer added. "But the last thing anybody should do is generalize or jump to conclusions about an entire group of people who are in a sector that is vitally important. The importance of the insurance sector to our economy can't be overstated. And that is why we have to work so diligently to make sure that it is functioning properly and ethically."

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.

Related Links

Adopted NCOIL Compensation Disclosure Amendment To The Producer Licensing Model Act (3/5/05)

PIA Summary of the NCOIL Compensation Disclosure Model (3/5/05)

Full Transcript of Fox News Interview With Eliot Spitzer (2/15/05)

PIA National Encouraged By Spitzer Remarks on Contingent Commissions (1/31/05)

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