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NU Online News Service, Feb. 8, 10:49 a.m. EST
The Independent Insurance Agents and Brokers of New York (IIABNY) said its negotiations with the New York State Insurance Department have resulted in some revisions to a proposed producer compensation disclosure rule.
The department, for its part, declined to comment on the updated rule or on how any changes to the rule came about. It is due to formally release the new regulation Wednesday, but IIABNY it received an advance copy of the latest version.
New rules were developed by the department in the wake of the 2005 New York attorney general’s investigation revealing that some commercial insurance brokers took hidden payments to steer clients to insurers involved in a bid-rigging scheme.
The department, in its current published rule, states: “The proposed regulation is intended to provide a means to address the potential conflict that arises due to the differences in the amount of compensation an insurer pays to its producers in the least invasive manner possible—by requiring that insurance producers make certain disclosures about their role in the insurance transaction and compensation arrangements with insurers to insurance customers.”
Upon publishing the rule on Dec. 2, IIABNY threatened to file a lawsuit over some of the provisions. The association said it particularly took issue with a requirement in the rule stating that a producer must disclose to a client whether he or she is acting as an agent or broker in a given transaction—whether the producer is legally representing the insurer or buyer. The organization said this requirement adds no value and could be confusing to the buyer.
IIABNY said the new version requires only that the producer provide a description of his or her role in the sale.
Tim Dodge, IIABNY spokesman, said the difference is that in the new version, the producer does not have to specifically say he or she is either an agent or a broker. Mr. Dodge said in some cases, the producer may be acting as both.
With the current language, he said, the producer is invited to have a discussion with the client about how the process works.
The new version also drops the requirement that producers provide initial compensation disclosures on all policy renewals, IIABNY said, which the association also favors.
But IIABNY said, “the rule did not make changes the group sought in the definition of compensation that a producer must disclose and in the required timing of disclosure notification, among a number of other needed changes.”
Regarding whether the group is still considering its threat of a lawsuit after these changes, Mr. Dodge said IIABNY’s board of directors will be meeting next week and will decide what to do going forward.