The New York State Insurance Department released proposed new rules mandating how and what insurance agents must reveal to clients about how they are compensated in the sale of a policy.
The so-called transparency rules – which are not yet instituted and could be changed — apply to all producers, but do not apply to wholesalers and managing general agents in New York. The transparency regulations come after nearly two years of meetings and public hearings that featured most of the state’s key trade groups for the industry and agents, as well as top executives from most large brokers in New York.
The 4-page document lays out broad new rules for the types of information agents must readily disclose to their clients when writing new business or renewing a policy.
As part of the regulation, agents inform clients – orally or in writing – whether they represent the client or insurer for purposes of the contract, whether the seller compensates an agent, that the agents commission can vary based on factors like insurer being selected, the volume of business sold, and the profitability of the insurer and that the insurance-buyer can request more detailed information from the agent about compensation, if he or she chooses.
If requested by the client, insurance agents would be required to give a more detailed accounting of their compensation, and the nature of their relationship with an insurer. Records of that disclosure would need to be kept for three years.
Agents are also prohibited from misleading clients about their compensation.
Agents’ groups said the newest draft of disclosure rules is the most palatable they have seen.
D. Scott Liebert, president of the Professional Insurance Agents of New York, said the latest draft “has taken our comments on earlier drafts into consideration, and we appreciate that they have been incorporated.”
PIANY said the new additions, such as those provisions for oral disclosure, are beneficial to agents.
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