Insurance News

N.Y.’s New Disclosure Rule Will Be Hit With Court Action

Posted on: February 12, 2010

A New York independent agent?s group said it is moving ahead with a lawsuit to block the state?s insurance department from implementing new agent and broker compensation disclosure regulations.

The Independent Insurance Agents & Brokers of New York said it planned to go to court to keep the New York Insurance Department from implementing rules published today in the State Register.

Those regulations would require insurance agents and brokers to disclose information about how insurance companies and others compensate them.

The rules would take effect on Jan. 1, 2011.

As outlined by the department, producers will be required to describe to consumers their role in the transaction and how they get paid. If the client requests it, the agent or broker will have to provide a more detailed statement about compensation (see NU Online, Feb. 9, “N.Y. Insurance Dept. Trumpets New Agent Disclosure Regulation”).

The association threatened to sue to block the rule when it was initially unveiled on Dec. 2.

IIABNY said that ?while recognizing that the department made some positive changes, the board concluded that the rule would place an undue burden upon its members for no justifiable reason.?

The association said it is also challenging the department?s authority to promulgate the regulation.

In a statement yesterday before release of the rules the department noted that it took two years to develop them following a probe with the New York Attorney General?s Office in 2004 that turned up evidence brokers took hidden commissions to steer commercial clients to insurers involved in a bid-rigging scheme.

In announcing the association?s intention to fight to block the rule, IIABNY President and Chief Executive Officer Dick Poppa said, ?IIABNY has a responsibility to represent and to protect the interests of its members, and our members have unanimously and vociferously told us that this rule is unnecessary, ineffective and overly burdensome to their businesses.

?We cannot sit back idly and let the department impose an unnecessary rule that will only serve to add another time-consuming and costly requirement for our members, which in turn could also result in additional costs to consumers.?

The IIABNY said it made its decision after months of negotiations between it and the department ?to make the final rule less onerous for producers.?

The group said it expects to launch the formal legal action soon.

The proposed regulation would require that when a consumer applies for an insurance policy, the agent or broker must explain to the consumer:

1. The agent or broker’s role in the transaction.

2. Whether the agent or broker will receive compensation from the insurer based on the sale.

3. That the compensation insurers pay to agents or brokers may vary depending on the volume of business done with that insurer or its profitability.

4. That the purchaser may obtain more information about the compensation the agent or broker expects to receive from the sale by requesting that information from the agent or broker.

If the consumer asks for more information from the agent or broker, he or she must be provided a more detailed written disclosure of the compensation expected to be received as well as a description of any alternatives presented by the agent or broker and the compensation associated with those alternatives.

© Copyright 2010 National Underwriter Property & Casualty. A Summit Business Media publication. All Rights Reserved.

SEC Votes for Corporate Disclosure of Climate Change RiskN.Y. Insurance Dept. Trumpets New Agent Disclosure Regulation

%d bloggers like this: