Despite earning praise from major insurance brokerages, a proposed new regimen of compensation disclosure rules for insurance producers has New York agents on edge.
The draft regulations issued earlier this month include rules that establish “minimum disclosure requirements.” Those requirements include the nature and amount of compensation, as well as language that tells consumers an agent “may have incentives” to recommend a particular policy “based on the amount of compensation paid.” It also includes a mechanism for clients to request information about producers’ compensation which was not known at the time of sale – in other words, contingent commissions.
The department is submitting comments from insurance industry before finalizing the regulations.
In the independent agency world, the proposal is being greeted with caution and worry.
The Professional Insurance Agents of New York, in a statement, said “(t)hough the draft regulation recognizes the legality of contingent commissions, there are, nonetheless, issues that we find troublesome.”
The state’s other major agents’ trade group, The Independent Insurance Agents and Brokers of New York, Inc. said it “has some major concerns with the proposal. IIABNY has consistently supported voluntary disclosure when requested by the client and opposes any additional burdensome requirements on agents and brokers.
Both groups said they are in talks with the insurance department over details of the proposal.
Major insurance brokerages, however, applauded the move.
“Aon strongly supports Superintendent Eric Dinallo’s efforts to introduce more transparency into the insurance sector and to establish consistent rules for all producers who operate in New York,” said Gregory Case, president and chief executive officer or Aon Corp. “We believe that all brokers and agents should, at a minimum, be willing to tell their clients who will pay them, how much they’ll make and the quotes insurers provide. This is the basic information every client deserves.”
Brian Duperreault, president and chief executive officer of New York-based Marsh & McLennan Companies, Inc. (MMC) said his company “fully support(s) Superintendent Dinallo’s efforts to create a level playing field. “We look forward to continuing to work closely with the New York authorities to establish an equitable regulatory landscape that serves the interests of all clients.”
Willis Group Holdings, which was the first insurance brokerage to voluntary end the practice of accepting contingent commissions, also applauded the move.
The draft of rules follows a series of hearings held last year across the Empire State by officials from the insurance department as well as the New York Attorney General’s Office.