By the end of the year, the District of Columbia could be among the growing list of jurisdictions unveiling new rules for agent commission disclosure.

Thomas E. Hampton

Thomas E. Hampton, the district’s insurance commissioner, told IFAwebnews.com that he aims to have new regulations in place to require agents to disclose any compensation they receive from the selling of insurance products.

“From my vantage point, we are here to protect consumers and we’ll try to get something implemented,” Hampton said. “I know it is being done informally, but we want a formal rule.”

Hampton said the issue has been around for years, dating back to regulators in Illinois and New York taking action against brokerage Marsh & McLennan over contingent commissions and alleged steering of business to meet targeted production levels.

The offshoot of those endeavors, Hampton said, is a fresh look at commission disclosures by several states. A law is now in place in New Jersey, and in New York, draft regulation is being debated for written disclosure of all agent commission.

As the overseer of banking and securities in addition to insurance in the District, Hampton said he sees the process already working.

“With securities, a professional has to show the compensation they are making when working with a client to procure an investment product,” he said. “I don’t see it as any different [for insurance]. We are seeing that it is being done informally now, but I want it to be the standard.”

Hampton said he is working with the National Association of Insurance Commissioners, as well as regulators in Illinois and New York, to use their legislation as an example for his efforts.

The commissioner said the process will be “straight rule-making,” with a draft regulation, followed by public comment.  Hampton has already heard from brokers with small books of business, he said, who fear he may seek to eliminate contingent commissions in the district, a move the commissioner says does not interest him.

“A lot of the smaller brokers said they feared I’d prohibit the practice of contingent commissions and that’s how they make their money,” he said. “They didn’t want to be painted with the same brush as big brokers. I’m trying for transparency here as part of the process as something good for us to deal with versus throwing out the baby with the bathwater and saying ‘no contingent commissions at all.’”

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