NU Online News Service, March 22, 11:45 a.m. EDT
The Independent Insurance Agents & Brokers of New York and the Council of Insurance Brokers of Greater New York say they will not appeal the decision of a state appeals court that upholds state regulations governing disclosure of producer compensation.
“We did all that we could to fight this misguided regulation,” says IIABNY Chairman Christopher A. Brassard. “The board has concluded that the likelihood of the New York Court of Appeals overturning the decisions of the two lower courts is small.”
On March 8, the Appellate Division of the Supreme Court of New York upheld a lower-court decision supporting Regulation 194 (Producer Compensation Transparency), which requires producers to supply clients with information about their compensation and give details about that compensation, including contingent commissions, if requested.
The two associations sued the insurance department, now the New York Department of Financial Services, shortly after the regulation was implemented in 2010.
The associations argued Regulation 194 is a burden because of its recordkeeping requirements and contended that the department did not have the authority to regulate disclosure of compensation. They also said the regulation has little benefit for consumers.
The courts disagreed and upheld the regulation.
Further appeal, says IIABNY, was considered too costly and futile.
“The board looked at the projected cost in terms of time and resources that an appeal would entail,” Brassard says, “and compared that to the probability that the court would rule in our favor. After a thorough discussion, the board concluded that it would not be in the members’ best interest to continue.”
He adds, “Our opinion of Regulation 194 is unchanged. We support transparency and disclosure when the client wants it, but this regulation is burdensome and unnecessary.”
The association is at odds with the Risk and Insurance Management Society, which has applauded the ruling.
The issue of greater disclosure sprang from the 2004 investigation by then-Attorney General Eliot Spitzer that alleged insurance brokers were engaged in a kickback scheme involving the steering of insurance contracts to certain insurers in return for lucrative contingent commissions.
For a time, four of the largest insurance brokers in the United States agreed to no longer accept contingent commissions to avoid further action from state attorneys general.
Those bans were lifted in 2010.