Just days after a top state court ruled it was legal for insurers to pay so-called contingent commissions, the New York Insurance Department and Attorney General said they will hold joint public hearings on the compensation arrangements for insurance agents and brokers.
The hearings will cover issues including contingent and supplemental commissions, producer compensation disclosure and deceptive or anti-competitive practices, said the insurance department in a statement. The hearings are scheduled for July 14 in Buffalo, July 23 in Albany and July 25 in Manhattan, and are designed to get the views of all interested parties on the proposed addition of a new regulation governing compensation and disclosure.
“Those who sell insurance deserve to be fairly compensated and those who buy insurance deserve to be fairly treated,” said New York Insurance Superintendent Eric Dinallo. “These hearings will help us understand how best to ensure the marketplace is competitive, transparent and fair to all.”
Compensation for agents and brokers has been a major issue since 2004, when then-Attorney General Eliot Spitzer launched a series of investigations into compensation practices some of the industry’s largest insurers and brokers. Regulators alleged that many brokers steered insurance business toward insurers which paid them the highest contingent commissions – essentially, commissions earned for achieving a certain volume or portfolio of business. The result was a series of settlements prohibiting some – but not all – insurance brokers from receiving contingent commissions.
Dinallo said he wants to hear views about whether agents, brokers and all other insurance producers should be required to make full disclosure to the insured and obtain consent in writing for any compensation from an insurer. Dinallo and Attorney General Andrew Cuomo also said they will evaluate different views on contingent commissions, and whether they create conflicts of interest for producers.
Critics say contingent commissions can lead to abuses such as improper “steering” of clients to insurers that may not provide coverage as beneficial as that offered by competitors. Advocates, however, argue that competition neutralizes those conflicts.
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