NU Online News Service, Jan. 19, 3:47 p.m.EST

Controversial compensation disclosure rules proposed by the NewYork State Insurance Department could still spark a lawsuit if thatagency fails to make changes, an agent group said.

That reaction from the Independent Insurance Agents and Brokersof New York (IIABNY) followed the closing of a comment period onthe new regulation, which the department said drew thousands ofresponses.

The proposed regulation was developed in response to a 2005 NewYork attorney general's investigation revealing that somecommercial insurance brokers took hidden payments to steer clientsto insurers involved in a bid-rigging scheme.

The department, in its published rule, states, "The proposedregulation is intended to provide a means to address the potentialconflict that arises due to the differences in the amount ofcompensation an insurer pays to its producers in the least invasivemanner possible–by requiring that insurance producers make certaindisclosures about their role in the insurance transaction andcompensation arrangements with insurers to insurancecustomers."

IIABNY announced last month that it disagreed with mandatorydisclosure, and threatened a lawsuit if the department movedforward.

The association said it particularly took issue with arequirement in the rule stating that a producer must disclose hisor her role–whether the producer is legally representing theinsurer or buyer in a transaction. The organization said thisrequirement adds no value and could be confusing to the buyer.

IIABNY spokesman Tim Dodge said today that the association willwait to see what the department does before settling on its owncourse of action, but he noted the threatened lawsuit remains anoption.

"I would say if the final version of the rule is identical to orvery similar to [the published rule], that makes it more likely wewould proceed with the legal action," he commented.

The department said it received 2,226 comments during the 45-daycomment period on the proposed regulation and is currently in theprocess of reviewing them.

The Professional Insurance Agents of New York (PIANY) said in astatement that it submitted a comment reiterating its "fundamentalobjection that any regulation to mandate disclosure would beunnecessary and an undue burden to honest insurance agents andbrokers."

PIANY President Kevin M. Ryan said in a letter on behalf of theassociation, "In fact, as we've pointed out repeatedly, thedepartment has not offered to share any documented harm relative tothe actions of Main Street agents and brokers that would justifythe adoption of a disclosure mandate."