N.Y. Insurance Producers to Press Fight After Court Upholds Disclosure Regulation

New York insurance producer groups vowed to continue the fight against new compensation rules despite a court ruling upholding a new state regulation.

The New York State Supreme Court in Albany County found the regulation mandating the disclosure of certain compensation information to all clients was not an overreach of the New York State Insurance Department’s discretionary powers. The Independent Insurance Agents & Brokers of New York and the Council of Insurance Brokers of Greater New York said they will consider the next steps in opposing what IIABNY Chairman David M. Gelia called “an outrageous attempt to rewrite the insurance law.”

CIBGNY President Anthony Aquilino, in a statement, said, “This regulation is unfair, unneeded, and beyond the insurance department’s authority. We regret that the justice saw otherwise.”

The ruling is a strong declaration of support for the department’s action, insurance department spokesman Andy Mais said. “We look forward to working with all stakeholders on implementing this regulation,” he said.

Under the regulation, customers must be informed of the producer’s role in the sale, whether the producer will be paid by the insurer and also that the customer has the right to request more information in writing, such as how much money the producer stands to earn and what his or her relation is to the insurer. 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.

The regulation is scheduled to go into effect Jan. 1, 2011.

The losing plaintiffs were among critics of a recent circular letter meant to finalize guidance for implementing the regulation. The five-page letter left a number of uncertainties, including precise definitions of the types of compensation subject to disclosure requirements and of required initial disclosures, Big I of New York President and Chief Executive Officer Dick Poppa said. One producer group that is not a plaintiff in the lawsuit, the Professional Insurance Agents of New York, said it was pleased to see several of its recommendations integrated into the final circular letter. These included that the use of an application to merely solicit quotes will not trigger any disclosure requirements; that the amount of compensation may be stated as a percentage of one year’s premiums; and that a producer may provide disclosure information orally if later followed up with a written disclosure (BestWire, Nov. 9, 2010).

(By Sean P. Carr, Washington Bureau Manager: sean.carr@ambest.com)