Transparent Conversations

If one were to poll every insurance agent in New York about the most important topic facing their profession, “compensation” would probably top the list of answers.

Between bailouts, Wall Street’s collapse and rising unemployment, money is on the top of every agent’s mind these days. For New York insurance agents, that’s doubly true, now that state regulators are calling for major changes that will require agents to show clients how they are paid.

This move toward transparency are a direct result of the scathing series of investigations into the industry that began nearly six years ago, and prompted massive settlements and major lawsuits related to how big insurance brokerages were paid. The battle over contingent commissions for big brokers has trickled down into main street agencies.

Earlier this year, the New York State Insurance Department circulated draft regulations that would make major changes to what agents disclose to clients about their compensation. This would likely include a notice to clients breaking down an agent’s commissions and any other compensation he or she receives. For numerous reasons, such as cost, administrative problems and general business taboo, agents are loathe to see those regulations passed in their current form.

But the movement toward mandatory disclosure seems inevitable. Last month, Richard Poppa, president of the Independent Insurance Agents and Brokers of New York, issued a poignant memo to members stating “it is quite apparent that the department intends to issue a regulation requiring mandatory disclosure, and voluntary disclosure is not an option.”

Superintendent Eric Dinallo, who sat down for an extensive on-camera interview with Insurance Journal in late February, said the move toward disclosure “is an attempt to pursue transparency for the industry, but whether it’s the final product is open to a lot more time and review.” The final product might look different, but Dinallo says he’s determined that some kind of new regulation will appear, and soon.

Some agents have argued that the calls for transparency were first brought on by misdeeds of big brokers. Those entities, they argue, differ tremendously from main street insurance agents who cater mostly to individuals and small businesses.

Dinallo says that argument is irrelevant.

“I don’t really understand that,” Dinallo said. “(Some) argue they are being dragged into this when it was the large commercial brokers that wreaked the havoc. I have sympathy with that, but I don’t think it’s a good solution. They don’t have to be brokers to have the same kind of conflicts.”

The interview, which can be seen online, offers insight into the thinking of the one regulator whose actions on this issue may have a major impact on the day-to-day business of every agent in the state.

And given that New York is the de facto headquarters of the nation’s insurance business, Dinallo’s decision could have implications well beyond the borders of the Empire State. And judging from Dinallo’s comments, transparency is a word that agents everywhere are likely to start hearing more often.

Topics New York Agencies Legislation