The Risk & Insurance Management Society is applauding the New York appeals court for upholding the broker disclosure rule.
“Consumers deserve the same transparency and information from their insurance brokers that is required of any other financial entity in order to make intelligent purchasing decisions,” RIMS stated.
“RIMS strongly believes that these disclosures will eliminate the inherent conflict of interest posed by contingent fee arrangements, enhance the relationship between brokers and consumers, ultimately benefiting all risk practitioners by creating a more efficient and accurate insurance marketplace.”
Last Thursday, an appeals court in New York agreed with the lower court’s ruling and said the insurance regulators have the authority to require brokers to disclose in detail the source of their compensation.
The rule, Regulation 194, was implemented in 2010 by the Department of Insurance, which is now part of the Department of Financial Services. It requires brokers to disclose their role in the sale of insurance and explain whether they get compensated from an insurer or third party, and factors that affect their compensation. Brokers are required under the rule to offer detailed information on their compensation to clients.
But in Matter of Sullivan Financial Group Inc. vs. Wrynn, opponents argued that the regulators had overstepped their authority when they implemented the rule. They also argued that the rule does a poor job of improving transparency. But the appeals court ruled last week that the regulators do have the authority to issue such a rule and that it’s not the court’s role to second-guess the rule’s effectiveness.
Agents’ Groups Say Regulation 194 Is Unnecessary
However, Independent Insurance Agents & Brokers of New York and the Council of Insurance Brokers of Greater New York– the agency groups that have been fighting in court to overturn Regulation 194 — maintain that the regulation is unnecessary.
“The Independent Insurance Agents & Brokers of New York still believes that Insurance Regulation 194 is a burdensome, unnecessary regulation that imposes new duties on insurance producers beyond those in existing law,” said Christopher Brassard, chair of the board of the IIABNY.
“We are very disappointed that the justices of the appellate court ruled otherwise. We respectfully disagree with their conclusion. The regulation places unprecedented obligations on law-abiding insurance producers without providing any benefit to consumers.”
Brassard added, “In the coming days, the IIABNY board of directors will review the court’s decision and contemplate appropriate courses of action.”
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