While his mid-Atlantic neighbors ponder regulations to force agents and brokers to disclose their commissions, Pennsylvania Insurance Commissioner Joel Ario says no such discussion is coming to his state.

Since the beginning of the year, several border states, including Maryland, New York and New Jersey, are either considering or enacted regulations in writing regarding new disclosure regulations for the insurance industry.

Joel Ario

“We’ve not been approached about this by the agent side, the consumer side or company side to say ‘this is a problem that needs to be fixed,’” Ario told IFAwebnews.com. “If people propose to me to have the discussion, I will have it. No one has proposed that to me yet.”

While no formal proposals are forthcoming from the Pennsylvania Insurance Department, Ario said there are other changes to state law he would support.

Currently, there are no disclosures required if agents collect all of their compensation from an insurance carrier, Ario said, but regulations that dictate disclosure for all compensation coming from the consumer.

The “hard situation,” he said, is the middle where an agent collects some compensation from the carrier and some from the customer.

During his tenure as Oregon’s insurance commissioner, Ario closed that loophole and would do the same in Pennsylvania.

“If I were writing the laws myself, I would say in that situation, you should disclose,” Ario said. “You should comply with the disclosure requirements already there for compensation you are collecting from the customer, but you should also disclose the fact you are collecting commission. Somebody in that situation may believe that they are paying you and they are the only source of revenue to you, so I think the case for commission disclosure there is a good case.”

No complaints

Ario said the issue of commission disclosure is not a source of complaints coming into the Pennsylvania Insurance Department.

Complaints that do come in, he said, usually involve agents trying to collect for more than what he calls “core services,” such as an application fee.

“We do go after those cases,” he said. “There is a consumer protection function there and we do want to make sure if somebody is collecting both commission and other compensation from the customer, that they are collecting for value added, real services on top of the core, commission-based services that are provided.”

Ario noted that the issue of disclosure came from brokerage Marsh & McLennan in New York and actions against contingent commissions and alleged steering of business.

The commissioner said that action was to “correct a problem that had been identified, so it doesn’t mean the remedial action should apply to everyone, just those who violate the law.”

“The problem with Marsh was they had too much market leverage and they abused it and to apply the same rule to someone else because of the position they are in …with less market coverage is a false consistency,” he said.

This story originally appeared in the June 2009 print edition of Insurance & Financial Advisor.