While a number of his colleagues are exploring greater rules to force those who sell insurance to disclose their commissions, Virginia Insurance Commissioner Alfred W. Gross thinks regulations already in place in his state are working.

Alfred W. Gross

But Gross is not ruling out future steps to ensure consumers know where their insurance dollar is being spent.

“We remain open, at the [Bureau of Insurance], if there are problems that evolve in the market,” Gross told IFAwebnews.com. “Now, we don’t see the need for further legislation.”

Under current regulations for “insurance consultants,” defined in state law as those who do not receive compensation directly from an insurer and work on behalf of a potential policyholder, they must disclose “commissions, incentives, bonuses, overrides, or any other form or remuneration” related to insurance in a contract.

Agents, under the definition of the state code, receive compensation from the insurer directly as their representative and therefore do not have to disclose commissions.

“It just makes sense,” Gross said. “If you are a consultant, you are expected to work [in the policyholder's] interest, so it is important that the customer know if indeed there is a bias created.”

Code being followed

Following issues with Marsh & McLennan in New York, where regulators took action over contingent commissions and alleged steering of business to meet targeted production levels, Gross said Virginia took a hard look at the issue as well and “people were following our codes.”

“Some regulatory issues were addressed, but nothing remotely like what was seen with Marsh,” said Brian Gaudiose, Virginia’s deputy commissioner for agent regulation and administration.

Gaudiose added that the BOI’s consumer services division also reported no recent problems related to compensation disclosure.

Gross said he is aware that other insurance commissioners are tightening rules, but his feeling is that disclosure needs to be for a reason and not just to heap regulations on professionals.

“Disclosures have to be helpful to consumers, not confusing,” he said. “There has to be meaningful disclosure. I feel the plan we have now in Virginia is pretty good in protecting consumers.”

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