The New York Insurance Department has officially released a new set of rules that will require insurance agents and brokers to provide some detailed information to clients about how agents are paid.
The new regulation, which goes into effect Jan. 1, has been a hotly contested item by agents in the Empire State.
In a statement, Superintendent James J. Wrynn said the regulation will provide transparency by requiring brokers and agents to describe to consumers their role in a transaction and how the agent and broker gets paid. The agent or broker then has to provide a more detailed statement about compensation if the consumer requests it.
“This regulation will provide New Yorkers buying insurance with an important tool to use in making an informed decision,” Wrynn said. “Almost everyone buys insurance at some point, and in these difficult economic times, consumers should understand any incentives that may potentially affect the recommendations from their agents or brokers.”
The regulation would require that when a consumer applies for an insurance policy, the agent or broker must explain to the consumer:
- The agent or broker’s role in the transaction
- Whether the agent or broker will receive compensation from the insurer based on the sale
- That the compensation insurers pay to agents or brokers may vary depending on the volume of business done with that insurer or its profitability
- That the purchaser may obtain more information about the compensation the agent or broker expects to receive from the sale by requesting that information from the agent or broker.
If asked, the agent must also provide a more detailed, written disclosure of the compensation expected to be received as well as a description of any alternatives presented by the agent or broker and the compensation associated with those alternatives.
“This regulation protects the interests of consumers while allowing agents and brokers flexibility in how they present compensation information,” Wrynn said. “Disclosure will help increase the trust and confidence consumers should feel when buying insurance. We have worked with consumers, agents, brokers and insurers to fashion a regulation that is fair to all stakeholders and takes all the comments we heard into account.”
Birny Birnbaum of the Center for Economic Justice, a nonprofit consumer advocacy organization, said “we hope consumers will take advantage of the compensation disclosures to discourage agents and brokers from steering consumers into unfavorable products — steering based on the agent and broker compensation arrangement and not the best interests of the consumers. Disclosures only work if consumers get the information and act on it.”
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