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PIA's Brevik Pledges Fight to Defend State Regulation

MEMPHIS, Tenn., June 24, 2005 - The National Association of Professional Insurance Agents steadfastly supports state regulation of insurance, strongly opposes an optional...
June 24, 2005

Warns Against Company-Specific Disclosure Requirements

MEMPHIS, Tenn., June 24, 2005  - The National Association of Professional Insurance Agents steadfastly supports state regulation of insurance, strongly opposes an optional federal charter and is cautioning carriers against adopting company-specific disclosure requirements, according to the association's executive vice president and CEO Len Brevik.

In an address to the annual convention of PIA of Tennessee, Brevik said PIA is also continuing to withhold an endorsement of the State Modernization and Regulatory Transparency Act (SMART).  

"PIA is a state's rights organization, in the best sense of that term," Brevik said. "We support state regulation of insurance and we are opposed to an optional federal charter. When it comes to state regulation, PIA is in this fight to stay."

Brevik quoted the mission statement in PIA National's newly adopted Strategic Long Range Plan: "To promote, protect and defend the integrity of our members, the value of their profession and the success of their businesses."
"This says it all," he said. "It is what PIA is all about. At times, it is a difficult task, but our job is to speak truth to power." He noted that PIA has been in the forefront of the public policy debate resulting from the investigations by New York Attorney General Eliot Spitzer.

"From the moment the first Spitzer story broke, PIA National shifted its focus," said Brevik. "PIA National has been engaged with the NAIC, NCOIL and with state legislatures across the country, in an effort to ensure that any new legislation is not burdensome for agents." He also noted that at times during the post-Spitzer period, it has been necessary for PIA to go on the offensive.

He pointed out that when a consumer activist, J. Robert Hunter, told Congress that the performance bonuses agents receive are "kickbacks" and implied agents may delay claims filings, PIA took Hunter to task in public. When Consumer Reports magazine advised consumers that by buying coverage from direct writers like State Farm, they can avoid "the bid rigging problem," PIA challenged them in public by releasing the story to the National Underwriter, which reported that Consumer Reports offered no evidence that independent agents were involved in bid rigging.

On the issue of insurance regulation, Brevik says PIA's position is crystal clear. "PIA is a steadfast supporter of state regulation of insurance - always has been, always will be," he said. "PIA has worked closely for decades with the NAIC. But when the NAIC adopted a broker disclosure model that was not in the interest of our members, PIA opposed it publicly."

Another recent area that PIA has been focusing on is educating carriers about some of the problems that can be created by company-specific disclosure requirements. Recently, a few insurers have begun to impose what they term "voluntary" compensation disclosure requirements on their insurance agencies.

"These requirements are 'voluntary' only in the sense that no law requires them," Brevik noted.

PIA believes regardless of whatever immediate, short-term, focused reason that outside counsels think they have for pushing carriers into such actions, in the larger, longer-term interests of the insurance industry as a whole, they are ill-conceived. They unwisely tread on current, well-defined insurance law that defines PIA members' agent-broker legal issues within which their E&O insurance and practices operate daily. Such requirements would create and codify conflicts in common law and create a multi-tiered compliance paradigm for independent agencies.

Brevik said that carriers would be wise to consider that the issues raised by compensation disclosure continue to evolve, and that any disclosure requirements created by insurance companies raise the possibility of an expanded view of both producers' and insurers' individual and mutual obligations in terms of compensation disclosure.

"Let me be clear: PIA adamantly opposes any such compensation disclosure requirements imposed by carriers," Brevik said, noting that PIA sent a letter to carriers last month advising them that insurer-created "voluntary" compensation disclosure provisions that may provide strategic and competitive benefits for the insurer "will be met with extreme resistance."

Tennessee Insurance Commissioner Paula A. Flowers attended the PIA of Tennessee convention, offering to continue to work closely with PIA members. Brevik thanked Flowers for her accessibility, and for soliciting the thoughts and opinions of PIA members.

"Please tell your fellow insurance commissioners at the NAIC that PIA is a state's rights organization, in the best sense of that term," Brevik said to Commissioner Flowers. "We support state regulation of insurance and we are opposed to an optional federal charter. As one of the most powerful insurance organizations, PIA looks forward to continuing to work with you and the NAIC to defend Main Street insurance agents, and the state regulatory system that oversees our industry."

PIA is continuing to submit comment on the State Modernization and Regulatory Transparency Act (SMART) to the House Financial Services Committee and meet with the committee's staff. Brevik said PIA has neither endorsed nor opposed SMART, largely because there are problems with it that must be resolved and because a bill has yet to be introduced.

"SMART is not yet ready for prime time," Brevik said. "So far, all anyone has seen is what has been called a 'discussion draft' but no redraft of that or an actual bill has been introduced. What we have seen has some positive aspects, but also some serious problems. This proposal needs more work. In the end, if SMART ends up being smart, we may support it. If SMART's not smart, we won't."

"Besides, there is a much more urgent priority Congress must address: passing an extension of the Terrorism Risk Insurance Act (TRIA)," he said.

Both Reps. Paul Kanjorski (D-Pennsylvania), the ranking member of the House Financial Services Committee and Sue Kelly (R-New York), got it right during the June 16 hearing on SMART when they made clear that the more pressing need for Congress is to pass an  extension of the Terrorism Risk Insurance Act (TRIA).

Brevik also reiterated PIA's opposition to proposals to establish an optional federal charter for insurers. "Proposals for optional federal charters are unworkable by their very nature," he said. "Creating conflicting, competing federal-state insurance jurisdictions applying to the same marketplace is both unnecessary and counterproductive to effective oversight of the insurance industry. An optional federal charter is like being somewhat pregnant - it's just not possible."

Following his remarks, Brevik accepted a gift presented to the Washington, D.C.-based national staff of PIA from the agents in Tennessee - a pair of boxing gloves emblazoned with the association's logo.

"You may have noticed that lately, some people have been taking a lot of shots at professional insurance agents," said PIA of Tennessee outgoing President Britt Linder. "The folks at PIA National have been quick to speak up on our behalf - to state AGs, at the NAIC, in Congress, with carriers and in the press."

Linder noted that recently, the National Underwriter reported on PIA's criticisms of a mega-broker's suggestion that contingency commissions for Main Street independent agents should be eliminated. The magazine put Brevik's picture and quote on its front cover, under a big boxing glove.

"It's nice to know that when we have to stand up for our interests, the staff at PIA National is always there to 'fight the good fight' for us," Linder said. "So, as a token of our appreciation, the members of PIA of Tennessee would like to present you with this custom pair of boxing gloves with the PIA logo. We know you'll be able to use them."

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. PIA will celebrate its 75th anniversary in 2006.

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