SENATE INSURANCE COMMITTEE REPUDIATES GARAMENDI

SACRAMENTO-The Senate Banking, Finance and Insurance Committee issued a stinging rebuke to Insurance Commissioner John Garamendi today, rejecting in its entirety his proposal to enact new fiduciary duties on brokers and agents and even voting down a compromise proposal to add new disclosure requirements.       
       
SB 938 (Dunn) would have imposed a series of unprecedented new fiduciary duties on insurance brokers and agents. But before Garamendi could even speak in favor of his proposal, Sen. Jackie Speier, committee chairwoman, announced that the Senate sponsor had agreed to committee staff recommendations to gut the bill and replace it with new disclosure obligations. Even with the amendments, the bill was rejected 5-2.        
       
"This is a huge, huge victory for insurance brokers and agents and for consumers," said Steve Young, IBA West general counsel, "and an equally huge defeat for Mr. Garamendi."        
       
Insurance brokers and agents and their clients flooded committee members with over 2,300 letters in opposition to the Garamendi proposal. Speier's office alone reported over 700 calls on the day before the hearing urging a "no" vote. A contigent of IBA West members visited legislators before the hearing today and later filled the hearing room reinforcing the importance of this issue to agents and brokers.        
       
"This tremendous outpouring of concern expressed by agent and brokers had a profound influence on the committee's decision," said Stan Simpson, IBA West President.        
       
Under the proposed compromise producers would have been required to disclose the number of competing insurance quotations the producer intended to obtain on the client's behalf. On every quote obtained, the producer would have also been required to indicate the quote amount, the rating of the insurer, and whether the producer was "recommending" that insurer.       
       
In addition, producers would have been required to indicate for each quote the "form of compensation" the producer would receive, if any, in the event a policy was placed with that insurer. The bill would have included a checklist of seven possible compensation forms, including base and contingent commissions, and other sales incentives, but would not have required disclosure of commission or other compensation amounts.       
       
The disclosure compromise would have also required producers to disclose whether they were representing the client's interests, or representing their own interests, in each transaction.       
       
Senator Dunn indicated he was willing to work with all interested parties to revise the particular disclosure requirements. When the committee heard testimony on the bill a quorum of the members was not present. Later in the day when a quorum was reached and the measure came up for a vote, it was defeated.        
       
"Our members responded to the call for action and their voice was heard today in Sacramento," said Clark Payan, IBA West CEO. "I deeply appreciate the efforts of those who made the trip to the Capitol to attend the hearing and witnessed first hand the power of a collective voice. Our thanks to everyone who sent letters and made phone calls for being part of this effort."       
       
Still pending is a new set of proposed regulations by the department of insurance that would require brokers and agents to make significant new disclosures regarding compensation. Early next week, IBA West will be submitting written testimony opposing the department's regulations and will be appearing at a May 9 workshop on these regulations.