NU Online News Service, March 8, 3:222 p.m. EST
WASHINGTON–Any legal effort to block New York’s compensation disclosure rule for insurance producers will likely fail, a former regulator told agents and brokers who met here.
Attorney Richard C. Hsia, a past New York deputy insurance superintendent, made his comment during last week’s Independent Insurance Agents & Brokers of America Diversity Luncheon, held with the association’s Legislative Conference and Convention.
Mr. Hsia, who is executive vice president and general counsel for Wright Risk Management and vice president of the Chinese America Insurance Association, said a suit to block the regulation would fail because the department has the authority to regulate compensation.
The Independent Insurance Agents & Brokers of New York said last month it would take legal action to fight the regulation, which goes into effect Jan. 1, 2011.
IIABNY contends the new rules would place an undue burden on agents and that the department did not have the authority to promulgate them.
The New York insurance department does have authority over producer compensation and is within its authority to put out rules governing payments, said Mr. Hsia.
He said any IIABNY action arguing that the department does not have the authority to promulgate such rules would probably not succeed.
Last month, New York Insurance Superintendent James J. Wrynn approved the new regulations for producer compensation that would require agents and brokers to explain their role in the transaction, how they are paid, and provide any additional information the customer requests. It also requires agents to maintain records of the disclosure to the customer.
Interviewed after his talk, Mr. Hsia said he believes that Mr. Wrynn had gone far and above what was necessary to draw up the regulations and take into consideration agents’ concerns, incorporating them into a rewrite of regulations.
He said he felt that the “administrative burdens” were of stronger and deeper concern to agents and brokers. How that works for agents still remains to be determined, but he said he believes Mr. Wrynn made a tremendous effort to accommodate those concerns.
The Risk and Insurance Management Society has criticized the rules as not being stringent enough.
While the rules are slated to go into force Jan. 1, 2011, Mr. Hsia said he believes the actual effective date will ultimately be up to the courts. He suggested that a judge could render an opinion that could send the matter to a higher court for an appeal, delaying implementation of the new regulation.