New York State Department of Insurance Superintendent of James Wrynn told agents at the Professional Insurance Agents of New York State’s Metropolitan Regional Awareness Program Jan. 28 that the modifications should lessen some of the industry concerns over the new rules. The PIA and other agent organizations have been working with New York regulators on the proposed rules for more than a year.
Wrynn told PIA members that the final draft will require agents to disclose their role in the sale of insurance to the consumer, either orally or in writing, and further detail will be required only if the policyholder requests it. Early versions of the broker compensation rules said agents would have to disclose any compensation to all clients, not only when asked.
“We’re kind of making it so you just have to disclose your role,” he said.
The superintendent said disclosure will not be required upon renewal of a policy, unless a purchaser asks for it within a 30-day period, and producers will be allowed to rely on insurers to maintain records for the required three-year period.
“I don’t believe we can have any lesser standards and still call it disclosure,” Wrynn said.
Ongoing debate
Wrynn’s office declined further comment on changes to the rules, after being contacted about a PIA statement regarding his comments at the meeting. The New York broker compensation and disclosure rules have been closely watched by other states and the industry, as they could become the model by which other states seek greater disclosure of agents and brokers’ interests in insurance transactions.
The latest draft of the rules should be released in mid-February, according to the PIA’s statement.
The rules have been the subject of debate since their release a year ago. Agents’ groups have argued that no need exists for the rules, and one association, the Independent Insurance Agents & Brokers of New York, has threatened to file suit if a previously released draft of the regulations goes into law.
The superintendent told agents at the meeting in Brooklyn, N.Y., that his office heard agents’ objections and promised to work with agents to ensure that the disclosure requirements will not be overly burdensome.
“We’ve heard everything everyone has said,” Wrynn said, noting the NYSID has read letters of concern about the draft regulation from various parties as recently as Jan. 15.
The superintendent told the audience of nearly 500 insurance professionals attended the event that he wants to continue to work with agent groups to sort out compliance issues to ensure the regulation “meets disclosure needs without being overly burdensome,” for the producer community.
The debate over broker compensation began in 2004 when then-New York Attorney General Eliot Spitzer began investigating claims of bid-rigging among some of the larger insurance brokerages. That investigation led to charges and an eventual settlement with the firms, including Marsh & McLennan Cos. and several others, prohibiting them from using contingent commissions.
In the summer of 2008, the New York Attorney General’s Office and then-Insurance Superintendent Eric Dinallo held hearings looking into whether a need existed to regulate broker compensation. The resulting rules were first released in January 2009, but have been subject to one overhaul and now additional tweaks. It remains unclear if and when final rules may take effect.