Trade groups: keep life insurance out of Mass. proposal banning ‘junk fees’

Massachusetts Attorney General Andrea Joy Campbell is mimicking the language preferred by federal regulators in proposing regulations to prohibit hidden “junk fees.”

Industry trade associations don't like those two words any better at the state level. In fact, the proposal is moot as it relates to the life insurance industry, a trio of trade groups wrote in a letter requesting an exemption for "life and annuity carriers and products."

Life and annuity carries are already "highly and ably regulated" by the Massachusetts Division of Insurance, said the letter sent Wednesday by the Life Insurance Association of Massachusetts, the American Council of Life Insurers, and the Insured Retirement Institute.

"Disclosures specific to life insurance-related fees must be sent to consumers, advertisements are strictly regulated and must be approved by the Division, and the Massachusetts insurance commissioner and regulators in other states have extensive authority to conduct market conduct examinations and request information and data from licensees," they wrote. "Inclusion of the life insurance industry in the regulation is unnecessary and inappropriate and would be harmful to our policyholders."

Total disclosure of so-called 'junk fees'

The proposed regulations would require Massachusetts' businesses to "clearly disclose the total price of a product at the time it is presented to consumers, provide clear and accessible information on whether fees are optional or required, and simplify the process for cancelling trial offers and recurring charges, amongst other rules," Campbell's office said in a news release.

“Millions of Massachusetts consumers are being harmed daily by businesses that charge hidden or surprise fees for profit,” Campbell said. “By prohibiting junk fees and requiring transparency, these proposed regulations will not only ensure that consumers know what they are actually paying for when buying a good or service, but also level the playing field and market for those honest businesses that clearly disclose their pricing upfront.”

The state describes “junk fees” as hidden or surprise fees above the advertised price of a good or service. These fees, sometimes termed “convenience fees” or “service fees,” are often not disclosed or explained, or they are disclosed only near the end of a purchase, rather than at the outset, the release stated.

President Joe Biden is using "junk fees" in several rulemaking efforts across industries. The financial services industry is most concerned about the fiduciary rule proposed by the Department of Labor. A comment period for that rule ends Jan. 2.

'Problematic' for life insurers

A number of sections in the proposed regulation "are problematic for life insurance companies," the letter explained. For example, a section of the rule would make it a violation to fail to “disclose the Total Price of any Product prior to requiring a consumer to provide any personal information, including billing information, unless said information is collected specifically, and only to the extent necessary, to determine whether the Sale of such Product to the consumer is legal, or whether the Product is available in the consumer’s geographic location.”

Although this disclosure requirement may make sense for other industries, it would "undermine the ability of life insurers to properly underwrite, thereby disrupting consumers’ access to financial and retirement security products," the trade associations said.

"Insurers must collect personal information during the underwriting process, before quoting a Total Price to a customer," the letter added. "Life and annuity carriers and distributors, for example, must collect personal information about a person’s age, general health, and financial situation before quoting a price and issuing a contract to a consumer. Insurance depends on the collection of personal information- up front, with the customer’s permission – to appropriately price the product."

The AG’s office held a public hearing on the proposal Wednesday and Campbell has said the rule could be enacted soon after. If enacted, Massachusetts would be only the second state (following California) to issue a rule specifically targeting “junk fees.”

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. 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 [email protected]. Follow him on Twitter @INNJohnH.