New York regulators are expected to release new rules tomorrow that require agents to disclose to clients some aspects of their compensation, although the rules are more palatable to agents than previous proposed regulations, according to an agents’ trade group.
The Independent Insurance Agents and Brokers of New York (IIABNY) said it has received an advance copy of the proposed rule, which will be published in the New York State Register on Wednesday.
IIABNY Spokesman Tim Dodge said the newest iteration of the rules require agents to disclose to their clients the majority of their compensation, but added that the newest version “did move a little bit closer to our position in a couple of areas.”
It is the fifth — and probably final — version of the proposed rules.
The producer compensation disclosure rules are perhaps the biggest regulatory concern New York agents have had in recent years. When first proposed, they were greeted with near-universal opposition by Main Street insurance agents, although larger brokers, in some instances, said the rules should move forward.
In December, IIABNY had threatened to sue the state if the proposed regulations were not watered down to make them less costly to insurance agents’ businesses.
Several key changes have been made to the newest version, Dodge said. Among those changes:
- Agents must provide clients with a description of his or her role in a sale. Previous versions of the rules had required agents specifically to tell clients whether an agent represented the buyer or the insurer in a particular transaction. Agents said that those rules could become unnecessarily confusing for customers.
- If asked, agents must provide information about different pay rates for different quotes they give to a client, although the department appears to have scrapped a proposal that agents provide that information automatically to clients on both new and renewal business.
“The department has definitely made a movement toward easing the cost impact on producers,” Dodge said. “It still represents a cost, no doubt about it, but not as severe as what we were looking at in December,” when the previous proposal of the rules was released.
State lawmakers proposed the rules in the wake of an investigation by then-Attorney General Eliot Spitzer into steering of insurance business by some of the industry’s largest brokers and insurers.
Matthew Guilbault, director of government and industry affairs for the Professional Insurance Agents of New York (PIANY), said the rules “present more questions than answers,” which is “reflected in the department’s intention not to actually enforce or implement the rules until January 1.”
Compliance issues are a major issue, he said, particularly around the technical specifics of compensation, such as incentive programs or other indirect compensation paid by insurers.
The rules, he said, “make substantial change toward recognizing the impact this originally would have done in terms of costs and burdens for individual producers. Are they still there? Yes, but not to the degree they once were.”
PIA President Kevin Ryan, an agent in Kingston, N.Y., said the regulations are most likely going to affect agents mostly from a procedural standpoint. Agents, he said, have no reluctance to share information with clients if they are asked, but many agents have concerns around the mechanics of record-keeping and day-to-day procedural aspects of the rules.
“It seems to me that the insurance department has listened is coming to the table with an open ear to end up with something that will meet their criteria for transparency to policyholders without being overly burdensome to agents,” he said.
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