NU Online News Service, Sept. 10, 3:54 p.m. EDT

New York's insurance department made its new Producer Compensation Transparency Regulation public today outlining how producers should inform clients about compensation and the details they must provide.

The regulations, which were sent to Governor's Office of Regulatory Reform for review, are not final and are still subject to modification or withdrawal after a 45-day public comment period.

They come in the wake of revelations in 2005 by the New York Attorney General's Office concerning evidence that some brokers failed to disclose contingent compensation for steering business to preferred insurers for commercial risks.

The four page regulation would require producers to inform clients of their right to request information on compensation provided by insurers for the sale or service of insurance.

If the client requests the information, producers will be required to give detailed accounting of their compensation, which can be done either in writing or orally. Producers will have to keep a copy of the written disclosure or certification of oral disclosure in their records for three years.

Agents, who do not deal directly with the insured, namely wholesale agents, are exempt from having to disclose compensation information.

Among some notable items:

o A client will be able to ask for compensation information on a contract after it is issued.

o In cases where the producer does not know how much compensation they will receive on the account a "reasonable estimate of the amount or value" can be given.

o Producers are prohibited from "contradicting the disclosure requirements" or making "knowingly inaccurate statements" about the producer's role in his or her compensation.

Matthew Guilbault, the Professional Insurance Agents of New York's director of government and industry affairs said "Overall, we are pleased with the draft."

After three drafts the association has seen "substantial and significant changes" since the initial draft, eliminating "burdensome and onerous" requirements, he noted. The current regulation achieves two things, he said, providing "useful and necessary" information to consumers and making it practical for agents to do it.

"It does not differ substantially from what our agents already do," said Mr. Guilbault. "That is when somebody walks in the office we freely admit we make money off of these policies and if you want more information, go ahead and ask. That is essentially what this draft regulation requires you to do."

A representative from the Independent Insurance Agents & Brokers of New York was not immediately available for comment.

After the last draft was made public, an IIABNY representative expressed satisfation with the way the department worked at making revisions and for recognizing that the nature of the relationship between agent and client is not adversarial.

This story was updated at 4:17 p.m. EDT

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