Posted on 05 Aug 2010
New York State Attorney General Andrew M. Cuomo defended state insurance regulators against accusations of exceeding their authority in adopting a new producer compensation regulation and asked that a complaint seeking to overturn it be dismissed.
In a filing before the Supreme Court in Albany County, Cuomo argued that Insurance Superintendent James J. Wrynn and department personnel engaged in a thorough and complete regulatory process before adopting Regulation 194 earlier this year. "Thus, Regulation 194, enacted pursuant to statutory authority and the product of an exhaustive regulatory process, fairly balances the interests of licensed insurance producers with the needs and expectations of insurance consumers," Cuomo's filing read.
The regulation was not only adopted properly, it addresses a missing component in financial services oversight, Cuomo argued.
"Insurance producers are virtually unique among financial services professionals in that they operate under a cloak of secrecy as to both the nature and extent of their compensation," he wrote. "Stockbrokers, real estate agents and mortgage brokers, for example, must all disclose to their clients any compensation they receive from third parties for work on their clients' behalf."
Plaintiffs will submit a formal rebuttal by Aug. 20, the Insurance Agents and Brokers of New York announced. Other plaintiffs are the Council of Insurance Brokers of Greater New York, Aurora Inc. and Sullivan Financial Group. Aurora President Andrew Kaufman is northeast region director for IIABNY. Sullivan President Neal Sullivan is the IIABNY chairman of the board.
"In all of our petitions, affidavits and legal briefs, IIABNY and CIBGNY have vigorously contended that this regulation was issued completely without the required statutory authority, and that certain of its provisions are arbitrary, unreasonable and unconstitutional," IIABNY President and Chief Executive Officer Richard A. Poppa said in a statement.
Under the regulation, customers must be informed of the producer's role in the sale, whether the producer will be paid by the insurer and also that the customer has the right to request more information in writing, such as how much money the producer stands to earn and what his or her relation is to the insurer. If the consumer asks for more information from the agent or broker, he or she must be provided 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 (BestWire, April 21, 2010).