The obligations for full disclosure "should be absolutely uncontroversial and should not be opposed by anyone interested in a fair, competitive, open market for insurance," Mr. Garamendi testified. The proposal, he said, merely clarifies and make more specific what the law now requires.

Mr. Garamendi went on to outline reasons and specifics of his proposal by answering typical questions that brokers and agents would likely raise.

"With respect to disclosure of the amount of commissions, brokers and agents will ask, ?Why should we have to disclose the amount of our commissions? Most salesmen sell on commission, yet they are not required to disclose the source and amount of the compensation they receive.'"

The answer, he said "is that buying insurance is not like buying groceries. Securities brokers and real estate brokers are required to disclose the source and amount of their commissions, and so should insurance brokers and agents.

You will be asked, "Who do these obligations apply to? Only to brokers? Or to brokers and agents?" he said, noting that in California, we have one license that permits a person to act as a broker or an agent."

While there are different requirements in different states, he said, "our definition of who these obligations apply to is simple: Anyone who represents more than one insurer, or anyone who holds him or herself out as acting on behalf of the prospective insured, must abide by these requirements."

Mr. Garamendi was on the second of two panels that testified on "Insurance Brokerage Practices, Including Potential Conflicts of Interest and the Adequacy of the Current Regulatory Framework" before a subcommittee of the Senate Governmental Affairs. The oversight hearing was convened by the Committee's Subcommittee on Financial Management, the Budget, and International Security. The chairman of the subcommittee is Sen. Peter Fitzgerald, R-Ill.

In his testimony Tuesday, Mr. Garamendi said the language of the regulations may change, but the basic intent is to require disclosure of all compensation a broker receives from any party, including any insurer, in connection with the placement of insurance on behalf of a client.

The objective, Mr. Garamendi testified, is to prohibit the broker from putting his or her own financial interest ahead of clients by, for example:

? Failing to obtain quotes for insurance from a reasonable number of insurers able to meet the client's needs, because the broker has an agreement to receive compensation from some insurers but not others.

? Failing to present an offer from an insurer able to meet the clients' needs because the broker has an agreement to receive compensation from some other insurer.

? Recommending that a client accept an offer from an insurer because the broker has an agreement to receive compensation from that insurer, when another insurer has made a superior offer that better meets the client's needs.

In his testimony, Mr. Garamendi said that "brokers and agents will complain, ?You are imposing an obligation to find the most suitable or best available insurance for a client. But there are many factors, not just price, that go into determining what is best for the client. This is an inherently subjective determination made by the client.'"

Mr. Garamendi argued, "We are not holding the broker to an obligation to find the best available insurance. The broker's duty is to take reasonable steps to determine the client's needs, to use its expertise to find options in the market place that meet those needs, to present those options to the client, and to make a recommendation, based on its expertise, of the best available option."

He added: "These proposed regulations simply say that in carrying out that duty, the broker may not put its own interests ahead of its client's interests. No one who is unwilling to accept that obligation should be doing business as a licensed broker in the state of California, and we will do everything necessary to make sure that they are not."