NAIC Group Debates Trips, Incentives In Annuity Sales Model

CHICAGO -- A line on "noncash compensation" led to an extended back-and-forth discussion on agent conduct as state insurance commissioners try to finalize an annuity sales model.

A National Association of Insurance Commissioners' working group meets again today and is on track to present a completed annuity sales model law to its parent committee. That would take place during the NAIC Fall Meeting Nov. 15-18 in San Francisco.

The extended discussion regarded a line requiring disclosure of any noncash compensation that exceeds $500 per year. It led to a sharp exchange between the amiable Chairman Dean Cameron, an industry veteran, and the equally placid Birny Birnbaum, executive director of the Center for Economic Justice.

Birnbaum repeated assertions often made by Sen. Elizabeth Warren, D-Mass., regarding agents and brokers who are rewarded with vacation trips, rings and other incentives for hitting sales goals. The practice is rife with misconduct and deceit toward consumers, Birnbaum insisted.

"The implication that everybody who is paid by commission is doing something nefarious is incorrect and uncalled for," said Cameron, Idaho insurance commissioner.

"Those compensation structures work," Birnbaum countered. "If they didn't, they wouldn't use them."

James Regalbuto, New York deputy superintendent for life insurance, a persistent voice for tougher rules, viewed the $500 skeptically. He recalled being a young agent just starting out and even having a desk was contingent on selling products. Would he have had to disclose to a client that his desk was "noncash compensation?" Regalbuto asked.

Does health insurance count as "noncash compensation?" he added.

"I'm not sure if 'cash' and 'noncash' is the right way to define this," Regalbuto concluded.

Incentives are not inherently evil, said Lorrie Brouse, deputy commissioner and general counsel for the Tennessee Department of Commerce and Insurance.

"The reason there’s incentives in the first place is because there’s a gap in the marketplace. And good salespeople are hard to find," she said. "I don’t want us to make something that is so difficult that the people we have in the marketplace now are going to go sell something else.”

The noncash issue is not as important as other disclosure points, Birnbaum conceded. In particular, the CEJ wants consumers to know that, for example, a consumer who is a suitable match for both a fixed and variable annuity should be told specifically and clearly how much compensation the agent will receive under both options.

The working group is reviewing each section today. The $500 noncash limit remains in the model law.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.