California Insurance Commissioner John Garamendi has published regulations requiring insurance agents and brokers to disclose any financial incentive they receive for selling insurance products and steering business to specific companies.
Aimed at a practice that has sparked a national controversy and criminal charges against industry executives, Commissioner Garamendi said his proposal would help clarify and strengthen the laws prohibiting these practices.
“When consumers place their trust in the hands of agents and brokers to find them the best policy at the best price, they should know if a backroom deal has already been struck,” he says. “My ongoing investigation will expose these under-the-table kickbacks that are not in the best interest of consumers.”
The regulations were released on Wednesday for public review, after which they must gain the approval of the state’s Office of Administrative Law.
New York Attorney General Eliot Spitzer recently accused the world’s largest insurance broker of steering clients to major insurance companies that had paid it large “contingent commissions.” He is pursuing civil and criminal actions in his investigation of the insurance industry, and three executives have already pleaded guilty to charges in the case.
Under Commissioner Garamendi’s proposed regulations, failure to comply could result in fines of up to $10,000 per incident, issuance of a cease and desist order by the Commissioner, and/or the revocation or suspension of a company or broker’s license.