In the wake of the brokerage contingency fee scandal, a leading independent agent association adopted a new producer compensation disclosure policy that it said encourages carrier consultation and seeks to avoid conflicting company requirements.

"Insurance agents, brokers and companies all must make independent decisions about whether and how to disclose the way they are compensated," IIABA CEO Robert A. Rusbuldt said in a statement.

"We recognize this fact, and we acknowledge that everyone in the industry must take all necessary steps to comply with their legal obligations," he added. "But we also recognize that a wide range of divergent company requirements could create inefficiencies that would disrupt the way insurance agencies and brokerage firms do business, and that is what we hope to avoid."

With respect to any insurers that choose to make their own disclosures, the Alexandria, Va.-based IIABA encourages them to notify buyers that:

o The insurance policy was placed by an independent insurance agent or broker, not an employee of the company.

o The company believes it is efficient and effective to distribute its policies through independent insurance agents and brokers.

o The agent or broker placing the policy with the company may receive commission for that placement.

o If applicable, the agent or broker may be eligible to receive additional incentives.

o Any questions about the nature of the compensation should be directed to the agent or broker.

"We fully encourage all carriers to fulfill their obligations under the law and to the public, and to do so in a way that respects the business needs of the independent agent and broker that sell their products," said IIABA President William G. Stiglitz III.

Carriers React

Reacting to the announcement, Bob Zeman, a senior vice president for the Property Casualty Insurers Association of America in Des Plaines, Ill., said, "We agree with their disclosure approach, that it is best for consumers, but we dispute that the responsibility rests with insurers. The requirement should be on the brokers."

"We do strongly agree that insurers should have the right to make their own disclosures, but it should be up to the individual companies to decide the terms and arrangements," he added. He said he was pleased the IIABA was not calling for mandatory disclosures, and that the controversy appears to be dying down.

Rick Nelson, a representative for the National Association of Mutual Insurance Companies in Indianapolis, said his group "sees this as a producer's issue as opposed to a company issue." He added that while understanding IIABA represents independent agents, the disclosure overemphasizes the role of independent agents, neglecting the reality that there are other forms of distribution through exclusive agents and direct writers.

A representative for the Council of Insurance Agents & Brokers said the Washington-based group does not comment on other association's policies, but noted that CIAB has promoted its own disclosure policy for some time now, emphasizing full transparency by brokers on all compensation arrangements.