New York officials are not planning to ban contingent commissions for agents and brokers but will issue regulations requiring them to disclose their compensation to clients.
Superintendent of Insurance Howard Mills recently voiced support for contingent commissions as an acceptable business practice and promised a large gathering of independent agents and brokers that his department would not promulgate a regulation that makes them illegal.
Instead, he said the department would issue rules governing disclosure of compensation by agents and brokers. He said he prefers a “common-sense approach” to disclosure requirements.
“Our objective is to give the typical insurance consumer the information they need to ensure that [agents] are acting in their best interest. Period. And that is where we are going to go with regard to the contingent commission question,” he remarked during the Professional Insurance Agents of New York State Inc.’s third-annual Hudson Valley Regional Awareness Program.
The exact nature of the “common sense” disclosure requirement remains unknown. Mills did say that the department’s aim would not be to provide insurance consumers with every single insurance quote available to them.
At a recent Manhattan forum sponsored by the Professional Liability Underwriting Society, the department’s deputy superintendent and general counsel, Audrey Samers, expressed her personal view that the percentage commission being paid should appear on every policy declarations page. She stressed this was her own opinion and not the department’s.
Asked at the PIANY meeting if this type of disclosure would be part of a final rule, Mills said he was not yet certain but it could be.
He also told Insurance Journal he was not sure if there would be a public hearing on the regulation before one is issued but maintained that the department remains open to industry input.
During his speech, the superintendent maintained that bid rigging and contingent commissions are separate issues. While bid rigging is illegal and would not be tolerated, contingent commissions are not illegal and have a proper place.
“This whole issue of contingent commissions has erupted and really thrown the industry in turmoil,” said Mills. “And let me say first off, that I do believe that a very good, very important, very critical industry was painted with a very, very broad brush. That’s unfortunate and it was not fair.”
Asked if he had differences with how Attorney General Eliot Spitzer handled his investigations of Wall Street brokers, Mills said, “I would have done it differently.”
He said that is one reason the department created a corporate governance unit to “surgically” address issues as they come up rather than “blow them up” out of proportion.
Mills complimented his hosts. “I recognize—and the Insurance Department recognizes—how important [agents] are to the industry and how more important you are to the insurance consumer,” said Mills. “The independent agents are the backbone of this industry.”
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