Anxiety is growing within the agent and broker community about rules in New York going into effect in January 2011, requiring them to disclose to their clients information about compensation received from insurers, with the locals warning of nationwide implications for producers.

Indeed, "insurance producers all over the country have New York licenses," noted Lane S. Rubin, chair of the Independent Insurance Agents and Brokers of New York.

"They may have heard about the new requirements and incorrectly believed that it's a New York matter only," he added. "They don't realize that they also will have to comply with these rules if they write business in New York."

He explained that the regulation applies to anyone required under New York law to hold a license to sell, solicit or negotiate insurance. This means it affects both New York producers and those in other states holding New York nonresident licenses.

"I'm afraid that nonresident producers who have only a few New York clients–particularly those in nearby states like Connecticut, New Jersey and Pennsylvania–will not be prepared if this regulation takes effect next January," according to Mr. Rubin.

Coincidentally, officials of the Association for Advanced Life Underwriting, which represents top life insurance brokers, issued the same warning to members attending its recent annual meeting in Washington, D.C.

Like the IIABNY, an AALU lobbyist said the trade group is contemplating taking legal action against the New York department to block the rule's implementation.

"This issue is so important that it's dominating the AALU board's agenda," Marc Cadin, AALU senior vice president, said at the group's meeting. "We're now debating whether to sue the New York Department of Insurance."

The commission disclosure proposal "is a solution in search of a problem," according to Mr. Cadin. "We'll do what it takes to minimize the damage this regulation might cause to our business."

Kenneth Kies, founder and managing director of the Federal Policy Group in Washington, D.C., a lobbyist for the AALU, said, "Our sense is that officials in the department are becoming more realistic."

"This is a work in progress–but an important one, given the implications for exporting commission disclosure requirements to other states," he added.

New York's recently published Insurance Regulation 194 calls for producers to disclose to their clients information about any compensation received from insurers.

The regulation, scheduled to take effect on Jan. 1, 2011, requires producers, at or prior to the time of application for insurance, to disclose to the buyer:

o A description of the producer's role in the sale.

o Whether the producer will receive compensation from the insurer or a third party for the sale.

o That a number of factors will affect the producer's compensation, such as the insurer chosen and the volume and profitability of business with that company.

o That the buyer may request more detailed information about the producer's compensation.

Should the buyer seek more information, the producer must also disclose:

o The nature, source and amount of compensation.

o Descriptions of alternative insurance quotes, as well as how much the producer would have received in compensation if the buyer had chosen one of them.

o Descriptions of material ownership interests the producer has in the chosen insurance company, and vice versa.

o A statement about whether the law permits the producer to change the amount of compensation received for a sale.

Special Reports /

Out of State Agents Warned About N.Y. Disclosure Rules

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