Producer Group Seeks to Overturn New York Producer Compensation Regulation
February 11, 2010 by N/A
February 11, 2010 | BestWire Services
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The Independent Insurance Agents and Brokers of New York said it will take legal action to block a new producer compensation disclosure regulation from taking effect.
The IIABNY board of directors concluded the rule would place an undue burden on agents and brokers “for no justifiable reason.” The association is also challenging the insurance department’s authority to promulgate the regulation.
The department published a new producer compensation disclosure regulation requiring agents and brokers to explicitly inform customers of their stake in a transaction.
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 (BestWire, Feb. 10, 2010).
In a survey, approximately 80% of IIABNY members said they had never been asked by a consumer about their compensation, President and Chief Executive Officer Dick Poppa said. The regulation would lead customers to focus on the “wrong thing,” he said, and not the coverages and prices of their insurance policies.
“We believe the marketplace should take care of this,” Poppa said. “This regulation significantly oversteps what’s needed in this regard.”
“This regulation protects consumers and their right to receive the information they need when making important financial decisions. We are confident in our legal authority to promulgate the regulation and look forward to aggressively defending it in court if necessary,” insurance department spokesman Andy Mais said.
The IIABNY will launch what’s called an Article 78 proceeding to seek a rollback of the regulation before it goes into effect Jan. 1, 2011. There is a four-month window for seeking Article 78 relief, Poppa said; the regulation was published in the state register Feb. 10.
The regulation followed 2008 hearings on compensation issues that focused on the restrictions placed on some of the world’s biggest brokers in 2005 settlements that followed bid-rigging investigations (BestWire, July 14, 2008).
(By Sean P. Carr, Washington Correspondent: firstname.lastname@example.org)