Connecticut Insurance Commissioner Susan Cogswell is warning agents that they will see legislation proposed in Connecticut to restrict or wipe out their contingent commissions. Cogswell says legislation should be expected because the state’s attorney general is among those behind settlements with several insurers to prohibit contingency pay and dictate how agents and brokers should disclose their pay.

Cogswell did not identify any specific sponsor or advocate for such a bill in her state but she suggested it would come because of recent settlements between a number of large insurers and officials from New York, Illinois and Connecticut, including Conn. Attorney General Richard Blumenthal.

Zurich, St. Paul, AIG and ACE are among the insurers that have signed pacts in which they have agreed to discontinue paying contingent commissions to agents and brokers on excess casualty coverage and agreed to stop paying them on any line of business if 65 percent of the U.S. market pays no contingent commissions or signs an agreement not to do so. Cogswell said once the anti-contingent commission legislation surfaces, agents will not have the support of some of their own insurance company partners because some of those who have signed settlement agreements agreed to a provision requiring them to support legislation and regulation to eliminate contingent commissions.

The Connecticut Legislature has adopted an amended version of the National Association of Insurance Commissioners (NAIC) model rules governing producer disclosure. Cogswell said she thinks that this public policy decision should be respected and not be overridden by court settlements relating to wrongdoing by large insurance brokers.

Cogswell criticized the settlements for infringing upon her state’s public policy and for making Main Street agents pay for the sins of large insurance brokers. She maintained that she and the majority of commissioners are at odds with the direction being taken by an NAIC committee that is pursuing further changes to disclosure rules. Cogswell expressed skepticism over further regulation of producer disclosure, suggesting few customers would read disclosure notices and arguing that requiring them would be a “waste of time and money.”

Connecticut Agents Told to Brace for Bill to Ban Contingent Pay (Insurance Journal 11/17/06)

November 22, 2006