RIMS (The Risk and Insurance Management Society, Inc.) External Affairs Committee Board Liaison Daniel H. Kugler today commended the New York Court of Appeals for its decision to uphold a ruling that would require insurance producers to disclose sources of compensation.
In January 2010, the New York Insurance Department issued its final rule, known as Regulation 194, requiring insurance producers to disclose their role within the sale of insurance, compensation received as a result of the sale and all other factors that contribute to their compensation. The Insurance Department was later subsumed into, and is currently part of, the New York Department of Financial Services.
Immediately following issuance of the final rule, some trade associations and insurance groups challenged the ruling claiming that the state’s insurance superintendent acted outside the scope of his authority. It was this challenge that the New York Court of Appeals struck down.
“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,” said Kugler. “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.”
In 2008 and 2009, RIMS played a pivotal role in assisting the New York Insurance Department in formulating both the proposed and final rule.