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Connecticut: Producer Compensation Bill Passes Out of Committee

Legislation based on the NCOIL producer compensation model passed out of the Senate Insurance Committee Thursday and now moves to the full Senate floor.

House Bill 6806 is one of five proposals introduced this session. NAMIC considers HB 6806 the most reasonable approach, but does not support the legislation, and spoke against it during the initial committee hearing on March 1.

Under HB 6806, prior to an insurance sale, a broker would have to get the client's consent to accept compensation from an insurer for placing the policy. The consent would not need to be in writing if the sale is made by phone or online. The broker would have to tell the client the amount of compensation expected from the insurer, including any prizes or stock options. If the amount is not known yet, the broker would have to describe how it would be calculated and make an estimate, if possible.

The bill does not require the same disclosure by agents as long as customers do not pay them. Agents would only need to tell a client that they represent the insurance company or will be paid by them for the sale of the policy. Agents would not need to disclose their compensation or bonus commissions, which are often based on the volume or profitability of their book of business with a given insurer.

"Unfortunately, politics is overtaking this issue in Connecticut and may endanger more reasonable approaches," said NAMIC State Affairs Manager Tami Stanton.

The Insurance Association of Connecticut says attempts will be made to amend the bill on the Senate floor. The Connecticut Department of Insurance would like to make violations under the proposed legislation subject to the state's unfair claims practices act.

The Department's legislative proposal, HB 6689, was not heard by the Legislature. Additionally, Attorney General Richard Blumenthal expressed his dismay at the Legislature's failure to hear his legislation, SB 1180, and also intends to work on floor amendments.

Direct questions to NAMIC State Affairs Manager Tami Stanton.