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ALEXANDRIA, Va.--The Independent Insurance Agents & Brokers of America has asked a federal court to change part of Zurich American Insurance Co.'s proposed settlement over its broker compensation practices.
In an amicus brief filed Friday with U.S. District Court for the District of New Jersey, the Alexandria, Va.-based IIABA holds that Zurich--and not agents and brokers--should have the responsibility for providing policyholders with any disclosure form required by the proposed settlement about how it compensates producers.
The brief says that agents need flexibility when dealing with clients. In addition, if other insurers followed the disclosure practices in the settlement agreement, policyholders would be swamped with confusing paperwork, the brief says.
"Customers receiving quotes on insurance products offered by different carriers would become inundated with varying written disclosures, which would be overwhelming and impossible to compare and understand in the context of complex insurance transactions, which would lead some consumers to ignore the disclosures altogether," argues the IIABA brief.
The mandatory disclosure form called for in the proposed settlement would not promote transparency, according to the IIABA.
The brief also reiterates the IIABA's opposition to a provision that would ban Zurich from paying producers incentive compensation in the future if 65% of the insurers in the marketplace do not pay such compensation for a particular insurance product or line of business.
In a footnote in the amicus brief, the IIABA argues that limitations on incentive compensation "will harm consumers because it will make it more difficult for smaller-sized agents to remain in business, which will in turn decrease competition and lead to higher prices." The brief holds that the negative impact of such limitations would be most pronounced in rural and underserved insurance markets.
The Alexandria, Va.-based National Assn. of Professional Insurance Agents also filed a brief last week urging the court to reject the proposed settlement.
Schaumburg, Ill.-based Zurich reached two regulatory settlements in connection with the proposed class action lawsuit pending in the New Jersey court against several commercial insurers and brokerages alleged to have been involved in improper broker compensation and business practices. Earlier this year, the insurer agreed to pay $171.7 million and reform certain business practices to resolve charges of price fixing and bid rigging by a group of state attorneys general. A few days later, Zurich agreed to pay an additional $153 million to resolve similar allegations brought by the states of New York, Connecticut and Illinois.
As part of that three-state settlement, Zurich agreed to cease paying contingent commissions on excess casualty business through 2008, and to stop paying the commissions for any line of business in which insurers that represent 65% of the gross written premiums on that line do not pay such commissions or were to reach similar settlements.