NAIC UPDATE
Exclusive agents fight back at NAIC
By Kevin Hennosy
Many industry observers have questioned the future viability of the exclusive agent, or captive agent, system. Coalition of Exclusive Agency Associations (CEAA) representatives do not agree.
A new, somewhat strident voice for producer perspectives has made itself heard at the meetings of the National Association of Insurance Commissioners (NAIC)--the Coalition of Exclusive Agency Associations (CEAA). CEAA membership consists of exclusive agent associations whose companies insure more than 60 million families.
The association has never been shy about stating its goals. The CEAA mission statement holds a prominent place on the association's Web site: The CEAA Promotes Fair and Equitable Legislation at the state and national levels by the encouragement of professional and ethical conduct of agents and all other members of the insurance industry (association's emphasis).
The CEAA was formed in response to dissatisfaction on the part of exclusive agency producers in the face of unfair treatment from insurance companies. Many industry observers have questioned the future viability of the exclusive agent, or captive agent, system. CEAA representatives do not agree. If treated fairly by their companies, these representatives believe that exclusive agents can compete in today's market. CEAA leadership bristles when company executives dismiss their member associations as "disgruntled agents" or "insurgent groups."
The Coalition's membership consists of the following agent associations: the National Association of State Farm Agents, Inc., the United Farmers Agent Association, the National Association of Professional Allstate Agents, the Nationwide Insurance Independent Contractor Agents Association, the National Association of American Family Agents Association, the National Association of Farm Bureau Agents, and the Minnesota Service Insurance Agents Association.
The CEAA brings a lean and mean earnestness to its business. The organization represents people who feel they are aggrieved--people who worked hard and played by the rules but were thanked with a callous disregard by the large commercial interests that they loyally served.
The energy that the CEAA brings to policy debates reminds a history buff of the fervor that pushed the populist groups, such as the Farmers Alliance in the 1890s. Of course, a closer parallel exists to the excitement that National Association of Independent Agents brought to policy circles at the turn of the last century on behalf of "local fire agents" fighting the insurance cartels.
The IIAA remains a powerful political force today, but maturity as an organization has made the group tentative. In political circles, the IIAA plays a conservative game designed "not to make mistakes." At the NAIC, the IIAA shies away from bare-knuckle fights.
The CEAA stakes out more aggressive positions. Among the journalists and consumer advocates who attend the NAIC meetings, the CEAA has differentiated itself as a group willing to adopt positions that are right for its membership--not just politically advantageous.
This is not to say that the CEAA has not taken care of building its political operations at the NAIC. As a relatively small trade association, the CEAA has built its presence at the NAIC slowly but surely. Since the mid-1990s, the CEAA has sent Don Cassell, a Baltimore-based Nationwide Mutual agent, to the NAIC. Cassell carefully monitored agent licensing and market conduct reform issues. Cassell's task has been made more difficult because most companies discourage participation in exclusive agent associations.
In a statement provided to Rough Notes, Cassell laments the uneven treatment his members receive from their companies: "These same companies not only encourage their agent's membership in the national and state life underwriters associations, many pressure new agents to join, implying that failure to do so might have an adverse effect on the consideration of granting an independent agency contract."
While this pressure from insurers has made it more difficult for the CEAA to grow, it has not killed it. In fact, the pressure from companies has made many agents more resolute in their support for their company associations and the CEAA.
Cassell observed, "Although membership of many state chapters of our member associations consists of a high percentage of the company's agents, insurers continually attempt to convince legislators that these associations represent only a small minority of agents."
Insurers' efforts to downplay the strength of the exclusive agent movement have not slowed Cassell's efforts to represent exclusive agent interests at the NAIC.
When NAIC drafted its Uniform Producer Licensing Model Act, Cassell was at the table with representatives of more senior and better-funded trade groups such as the IIAA, the Professional Insurance Agents (PIA), the National Association of Insurance and Financial Advisors (NAIFA) and other trade groups. Since that time, Cassell has taken an increasingly active role in NAIC deliberations.
At the NAIC national meeting conducted in Chicago last December, a new representative joined Cassell. John Bryant, a Hammond, Louisiana-based agent for Allstate Insurance, brings a new skill set to the CEAA lobbying effort. He approaches lobbying with an intensity of an Army Ranger. One can best describe Bryant's approach to the policy process in terms of political-force projection. He enters battles to win.
Bryant cut his political teeth in a political war over a bill prohibiting the imposition, in certain circumstances, of life and health sales quotas in Louisiana. Louisiana Governor Mike Foster signed the bill into law on June 13, 2001.
When producers were faced with company-authored contract amendments that made their authority to sell property/casualty insurance contingent on life and health sales quotas, they sought legislative relief. Political insiders counseled agents that it was futile to have a bill introduced on their behalf. Insurance company influence in the legislature would kill the bill in committee, pundits said.
Bryant had a stronger belief in the tenets of American democracy than the pundits and was unwilling to accept their assessment.
Bryant organized
The life and health quota amendments provoked a visceral reaction from many Louisiana agents. Or in the terms that any ward committee person should understand, the quota prohibition proposal was a "damn right!" issue--an issue that caused a group of citizens to stand up and say "damned right!"
Before those citizens could make a stand, they had to know that the issue existed and what they could do to support it. Bryant worked hard to distribute information about the bill and the political process though Internet communications and old-fashioned "jaw-boning." On the day that the committee considered the proposal, Bryant turned out 75 agent-citizens to support the "dead on arrival" bill. Democracy won.
Bryant fends off any attention that he receives for his Baton Rouge victory. He reminds those who praise his efforts that he was only one of the agents who showed up for the hearing, and that support for the reform from state Representative Henry "Tank" Powell was vital to success. Now Bryant and Cassell have teamed to bring their knowledge, energy and political skills to the NAIC. Both men know that their efforts will require support from exclusive agent associations, state chapters and individual agent members but they know how to get the job done.
This month, the NAIC will formally approve its 2002 "committee charges"--or policy issues under consideration. The CEAA has monitored the formation of these charges and plans to express positions in a number of areas: life insurance suitability standards, implementation of agent licensing provisions of the Gramm-Leach-Bliley Act and the general reform of how states regulate insurers' market conduct.
Cassell and Bryant come across as the classic pairing of "Mr. Inside/Mr. Outside." Just as that combination resulted in some exciting football for Army in the 1940s, the CEAA combination seems to have a few plays of its own planned for the NAIC gridiron. *
The author
Kevin Hennosy, an insurance writer specializing in the history and politics of insurance regulation, covers the proceedings of the NAIC (National Association of Insurance Commissioners) for Rough Notes readers. Hennosy began his career with Nationwide Insurance Companies and then served as public affairs manager for the NAIC. He has written extensively on insurance regulation and testified before the NAIC as a consumer advocate. He is currently writing a history of insurance and its regulation in the United States.