As of today, the 2011 Regular Session is underway. What we assumed would be a quiet
Session has taken a turn and we write with the utmost urgency for you to respond to
this Legislative Alert and contact your Representative and Senator today to urge them
to VOTE NO to HB 137 (Cortez) and SB 96 (Quinn).
We provide a link to both of these bills for your review below. At first glance, there
is a good chance that you may think these bills do not affect you if you write small
accounts. However, we must point out that changing the current laws that deal with how
agents are compensated is extremely dangerous for your future. While the four threshold
criterion were negotiated as a compromise and may appear to limit who these bills will
affect, we strongly feel passing this legislation creates a "slippery slope" that we
should not go down.
First, let us give you the genesis of this legislation. Back in the fall, it became
aware to the Department through a complaint in the health insurance marketplace that
some entities were violating the current laws pertaining to methods, acts and practices
which are defined herein as unfair or deceptive
(R.S. 22:1964) as well as laws that
mandate that premium quoted by the insurer shall be a specific dollar amount which
shall be inclusive of all fees, charges, premiums or other consideration charged
for the insurance or for the procurement thereof
(R.S. 22:855). Because such rates are
based, in part, on the payment of commissions, the insurer may not subtract the commission
being paid the insurance producer or insurance broker from either the rate or the premium
. . . an insurer, producer or broker shall not quote a premium that is "net of commissions"
because to do so would be a violation of R.S. 22:855.
In response to this complaint, Commissioner Donelon issued Bulletin 2010-01 and Advisory
Letter No. 2010-01 (links provided below), which caused some to take notice because they
had not been following the law. Some have tried to say that Commissioner Donelon introduced
some new position when he issued this Bulletin and Advisory Letter, but in fact all he
really did was reiterate what already can be found in the current statute.
This legislation if passed would change our current laws that were created and placed in
force over the years to protect the consumer and create a transparent process that allows
open competition. This legislation would strike the very laws that were set up to guard
against the acts and practices that are defined herein as unfair and deceptive. There has
been much effort put into the laws that create transparency. There was a reason for every
battle fought to put these laws on the book. Eliminating the protection created by these
laws would be a serious step backward.
When the the Louisiana Department of Insurance first issued their letter on quotes net of
commission they based their decision on the Unfair Trade Practices section of the Louisiana
Insurance Code. RS 22:1964 lays out 25 different actions that are considered to be unfair
trade practices. The Louisiana Department of Insurance stated in their bulletin that quotes
net of commission and then negotiating the fee separately violates the provision against
unfair discrimination RS 22:1964 (7) and the provision against rebates in RS 22:1964 (8).
To enact the compromise would allow an entire section of the marketplace to be exempted
from two sections out of twenty-five of the Unfair Trade Practices section of the Louisiana
Let us point out to you why these bills are bad as well as provide you with talking
points you can use with your legislators:
WHY IS THIS LEGISLATION BAD FOR CONSUMERS & THE STATE:
R.S. 22:855 (2) (b) provides that fees are not included in premium tax
computations paid by insurers as premiums but commissions are included
in premium tax computations. If this legislation passes, the State of Louisiana
would be subject to the loss of a significant amount of revenue currently
generated by the premium tax being collected on the commission portion of
the premium. Therefore, the State of Louisiana would suffer the loss of
premium tax at a time when the budget is already strained.
R.S. 22:855 (B) states that within 30 days of cancellation the agent must
return unearned commission but does not have to return fees. Therefore, the
consumer is punished under this form of compensation because they do not get
any portion of their agent.s fees returned if they must cancel their policy.
Present law was well thought out by all parties and is enforceable. This change
to current law invites a lack of transparency, inviting corruption, deception,
malfeasance and unethical practices.
Present law protects the consumer as it requires disclosure of compensation,
whereas this change invites lack of disclosure at some level of the purchase,
be it the reinsurer, company, broker, consultant or agent. Hidden charges and
compensation will become common, as has been demonstrated in the past here and
in other states.
Some supporters of this legislation will say that allowing agents to be
compensated in this way would save money for the consumers, but there is
no evidence for this to be the case. Savings comes from free trade and open
commerce in the marketplace, which current law encourages. This legislation
would most likely stifle competition, leaving small agency business owners
at a disadvantage to compete for these accounts and the consumer being blocked
from getting the best terms and conditions available in the marketplace.
While the thresholds presented in this legislation are said to reduce the
number of agents affected by this bill, any attempt to offer a threshold
will be discriminatory to some. For example, the consumer that has a policy
that falls just under the $500,000 premium amount will question why they can't
negotiate the same deal.
Our intent today is to communicate to you the introduction of
and to assure you that you will be contacted by PIA with pertinent updates and requests for
action as the need arises. However, please keep in mind that it is never too early to
contact your legislator and urge them to vote NO to HB 137 and SB 96.
access prepared letters that you may personalize to send to your Legislators to OPPOSE
HB 137 and SB 96.
Click through to view
Advisory Letter No. 2010-01
released by the Louisiana Department of Insurance July 6, 2010 and August 9, 2010, respectively.
If you have any questions or concerns related to these legislative instruments, please
do not hesitate to contact PIA of Louisiana lobbyist, Robert Wooley, or the PIA of
Louisiana state office at 800.349.3434. As always, we are here to serve you