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NU Online News Service, Sept. 15, 2:17 p.m. EDT
The chief executive of an independent agents group said his organization finds New York State’s proposed producer compensation disclosure regulation unacceptable and without changes legal action is a possibility.
Richard A. Poppa, president and chief executive officer of the Independent Insurance Agents & Brokers of New York, said that after a conference call with association executives and officers yesterday it was determined that, “in its current form, without additional changes, we cannot support [the regulations].”
He said the association has every intention of continuing discussions with the governor’s office and insurance department officials to clarify portions of the regulation, but he would not take off the table the possibility of a legal challenge if changes are not made.
However, “it’s a little premature to talk about legal or other action,” said Mr. Poppa in response to a question. “We expect to continue working with the governor’s panel and [the insurance] department.”
At issue is the department’s announcement last week of regulations that would require agents and brokers to inform clients that they have a right to receive compensation information. If the customer wants the information, the regulation outlines how and what needs to be disclosed and what records need to be kept.
The proposed regulation (available at the www.ins.state.ny.us) is now before the Governor’s Office of Regulatory Reform for review. After that review, it will be subject to a 45-day comment period and is still subject to modification or withdrawal after the comment period.
Mr. Poppa said there are several sections of the four-page regulation that the association could not live with. One is the role of the producer as an agent or broker in the disclosure.
He said this section offers no value to the producer-client relationship. Others have argued that it could lead to confusion on the part of clients over the technical relationship of a broker when both agents and brokers aim to work in the best interest of their client.
Mr. Poppa said there are circumstances where the producer or customer service representative dealing with a client would have no idea what the compensation arrangement is, making the insurance transaction unnecessarily cumbersome for all parties.
“This is one item we cannot accept in any form,” said Mr. Poppa.
Other portions of the regulations are murky in their application and open to interpretation, he said. He mentioned the sort of information that has to be given on renewals and how much information needs to be given beyond what the customer requests or is helpful to understanding the transaction.
He said there is also a concern that the regulation will cost producers more than its value to consumers. Others have noted that there are unknown costs involved from the storage of records that must be kept for three years.
“We still don’t believe that this regulatory action is necessary, but if there is going to be a regulation, then it needs to be clear and unambiguous so producers do not have to anguish over what is required and what is not,” said Mr. Poppa.
He added that he is optimistic that the issues can be worked out, noting that a good relationship remains between all parties involved and that they will “come to a good conclusion for consumers and members.”