The California Department of Insurance decision to drop plans for an agent-broker compensation disclosure regulation in favor of voluntary guidelines has sparked an argument between agents' groups over whether those guidelines would effectively impose the same burden.

California Insurance Commissioner John Garamendi announced earlier this month that he was suspending efforts to enact the regulations in light of a set of guidelines crafted by the Insurance Brokers and Agents of the West that he felt would provide consumers with adequate protections.

The proposed regulations would have required insurance agents and brokers to disclose to clients what compensations they receive from insurers and what compensation they would receive for placing their clients business with that company, or how that compensation would be calculated. Agents and brokers would also be prohibited from accepting any compensation from a third party without first obtaining a client's consent.

In addition, the proposed regulation would have required agents to disclose whether they were seeking quotes from multiple insurers, and provide their clients with the number of quotes they received as well as information about each quote.

Mr. Garamendi had twice tried to enact the regulations, which were designed to combat bid-rigging and steering activity, but had been foiled in court challenges from agents groups, including the IBA West.

Another agents' group, however, the Alliance of Insurance Agents and Brokers, said that while it welcomed the commissioner's decision, it was "concerned that the DOI [Department of Insurance] expects the industry to impose self-created disclosures patterned after the withdrawn regulations that lacked authority under case or statutory law," according to the group's executive director, Ken Nigohosian.

"With all due respect to the IBA West, we are disappointed they would issue these guidelines," Mr. Nigohosian added. "Moreover, if the DOI press release is accurate, we are astonished they would want to share their disclosure guide with the DOI, which provides the commissioner with another reason to breathe life into this unnecessary issue.

"This places the IBA West in an untenable position of carrying forward the DOI's policy for disclosure, while also taking the position that the relationship between insurance producers and customers is not fiduciary."

The previous court challenges, Mr. Nigohosian noted, had shown the issue of an agent's fiduciary duties is not one that Mr. Garamendi has the authority to regulate, and he criticized the IBA West for doing work for the Department of Insurance.

"The Alliance does not believe it is appropriate for any trade association to support a form of disclosure which the DOI suggests be 'widely adopted' by agent/brokers to address its concerns," he said. "The issue of fiduciary duties and disclosures of compensation is a matter for the legislature, which to date the legislature has not determined is necessary to regulate."

Responding to the Alliance, the IBA West said its guidelines were crafted at the request of its members. "It was drafted by a task force of our members," the group said in a statement. "It is completely voluntary and is intended not as a recommendation of any particular action, but merely as a presentation of considerations for member evaluation."

Additionally, the IBA West said that reality dictates the agent community establish some means of dealing with the issue, rather than try to ignore it.

"The Alliance is entitled to its opinions," the group said. "However, we believe the suggestion that agents and brokers do not have any potential liability is contradicted by the fact that litigation is already pending in courts all over the country.

"Clearly, we don't agree with the views being advanced by plaintiffs' lawyers, but neither do we agree that agents and brokers should not be concerned about this litigation threat."