N.J. agents balk at commission disclosure

Agents in New Jersey are protesting a state proposal to require originating brokers making surplus lines placements to tell insureds they will receive a portion of the commission.

Professional Insurance Agents of New Jersey Inc. President Andrew Anderson told the Department of Banking and Insurance during a recent meeting that the change would unnecessarily expand the current disclosure requirement.

“PIANJ opposes the new requirement because we do not believe there is a valid reason for requiring such a disclosure,” said Anderson. “It is an administrative burden being placed upon producers that will offer no benefit to the insurance consumers of this state.”

According to Anderson, state regulations already require producers who charge fees to disclose in the required written fee agreement whether the producer also will receive commissions from an insurer for the placement. The department’s proposal would take the current rule a step further by requiring originating brokers making surplus lines placements to inform the insured that the producer also will receive a commission from the surplus lines producer, even when the originating broker is not charging a fee to the insured.

Anderson asserted that the existing regulation is a reasonable approach to commission disclosure that need not be expanded.

The department is also proposing changing rules governing fees and commissions to clarify that the fees surplus lines producers may charge to originating brokers are limited to $50, plus the actual costs incurred for other services, such as inspection services.

PIANJ said it sees several technical problems with the clarification, which could create confusion for producers.