Since 2004, when a joint investigation by New York insurance regulators and then-New York Attorney General Eliot Spitzer leveled bid-rigging allegations against brokerages that resulted in prohibitions on contingent commissions, work has been ongoing to create a broker disclosure compensation rule.
That long-anticipated rule was published Wednesday by the New York State Insurance Department, and it mandates that producers tell their clients, if asked, who is paying them and how much. The rule goes into effect Jan. 1, 2011, and is expected to be challenged by a number of agent organizations, many of which argue the rule is needless.
The disclosure rule has been more of a looming reality since 2008, when regulators held joint hearings with the New York attorney general’s office. The rule was published in the New York State Register in early December, and interested parties were given until Jan. 16 to comment.
In a statement, New York State Insurance Superintendent James Wrynn said that the new regulation is designed to provide transparency by requiring agents and brokers to describe to consumers their role in a business transaction and how they are compensated.
The Independent Insurance Agents & Brokers of New York (IIABNY) has opposed the New York Insurance Department’s proposed regulation, arguing that the rule will not adequately protect consumers and will unduly burden producers.
In an apparent compromise, IIABNY called for producers to voluntarily disclose the existence and nature of their compensation as part of their larger client communications. The group told Insurance Networking News that it had reviewed the final version of the regulation, scheduled a meeting with state regulators, and would issue a “formal response” Thursday.