Nevada Issues First Broker Fee Rule
Nevada has become the first state to set new broker compensation disclosure rules in the wake of New York Attorney General Eliot Spitzers probe into the industrys contingency fee scandal.
The temporary regulation issued earlier this month received a good review from an insurer trade group. Sam Sorich, vice president of the Property Casualty Insurers Association of America, said the Nevada Division of Insurance “took a well-reasoned approach in crafting its temporary regulation. Appropriately, the temporary regulation applies only to brokers.”
The Nevada regulation defines a broker as basically anyone who is not an agent for a company, and thus restricts the category essentially to those intermediaries who are compensated by the insured. They would be the only people expected to report their compensation under the new Nevada fee disclosure rules.
So far, bills have been introduced in only two other state legislatures, according to PCIs vice president, Mike Koziol.
Connecticut Gov. Jodi Rell has introduced a bill that tracks closely to the model created by the National Association of Insurance Commissioners in December, which includes agents in the reporting scheme. That measure will face competition from one introduced by the states attorney general, Richard Blumenthal, which Mr. Koziol said the industry views as more onerous.
A bill has also been introduced in the Arkansas legislature that is fairly closely modeled on the NAIC measure.
In California, a regulation has been proposed that would impose a fiduciary duty on brokers, as well as contain a provision requiring them to seek the “best available insurer” for their customer. Mr. Koziol said these are unreasonable burdens on brokers.
NAIC regulators debated at length just who should be included in the new reporting requirements on disclosure of compensation sources. Some wanted it limited to brokers, who are believed to be at the heart of the bid-rigging scandal that spurred creation of the model. However, others felt agent compensation was also worthy of such scrutiny.
In the end both categories were included in the model law.
Reproduced from National Underwriter Edition, February 18, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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