New York: NAMIC Urges Department, Attorney General Not to Impair Appropriate Compensation Methods

Policymakers examining the subject of producer compensation should be cognizant of the distinction between agents and brokers as well as the appropriate role of contingent commissions in the insurance marketplace, NAMIC advised the state Insurance Department and Office of the Attorney General.

In testimony submitted in the state’s broker compensation hearings, NAMIC Northeast State Affairs Manager Paul Tetrault urged state officials “not to adopt regulations, statutes or other measures that would unduly hamper our members’ ability to use appropriate and useful compensation methods to distribute products in a competitive environment.”

When considering issues related to producer compensation, it is imperative to keep in mind the distinction between agents, who ultimately represent insurers even as they provide services to consumers, and brokers, who are retained by insurance buyers to provide professional advice and services, Tetrault asserted in the testimony. “When a consumer interacts with an agent and the only payment made is a premium to the insurer, the consumer naturally understands that the agent is being compensated by the insurer. Disclosure of this fact would serve no purpose,” he said. “On the other hand, if an insurance buyer enlists the services of a broker and agrees to pay that broker a fee for service, the buyer’s expectation regarding compensation would be quite different.”

State officials also need to be mindful of the important and appropriate role of contingent commissions in the property/casualty marketplace, Tetrault pointed out in his testimony. “NAMIC believes that payment of contingent commissions by insurers to the agents that represent them is a business practice that is not only traditional but also appropriate and ultimately beneficial for all involved in the insurance transaction,” he asserted.

Above all, Tetrault said, the insurance department and attorney general review of the issue should not result in the adoption or recommendation of any statute, regulation, or other measure “that would impair the utilization of compensation methods that are useful and appropriate and which serve the interests of producers, insurers and ultimately insurance buyers.”

Direct questions to NAMIC State Affairs Manager Paul Tetrault.

Posted: Tuesday, August 12, 2008 12:00:00 AM. Modified: Tuesday, August 12, 2008 9:40:06 AM.

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We are 1,400 property/casualty insurance companies serving more than 135 million auto, home and business policyholders, with more than $196 billion in premiums accounting for 50 percent of the automobile/homeowners market and 31 percent of the business insurance market. We are the largest and most diverse property/casualty trade association in the country, with regional and local mutual insurance companies on main streets across America joining many of the country’s largest national insurers who also call NAMIC their home. More than 200,000 people are employed by NAMIC members.