While controversy surrounds the implementation of producer disclosure regulations by the New York State Department of Insurance, associations say they are obligated to prepare agents for the new mandates, like them or not.

Regulation 194 is scheduled to take effect Jan. 1, 2011. It will require New York insurance agents and brokers, either orally or in writing, to:

o Describe the role of the insurance producer in the sale.

o Disclose who pays compensation to the producer.

o Describe what factors determine the amount of compensation.

o Inform the purchaser that they can seek additional information about the producer's compensation, while requiring that the disclosure include the amount of compensation, alternative quotes and any potential conflict of interest.

The regulation also covers the time period for disclosure, estimating the value of commissions from the sale of insurance, and how long records are to be kept. The regulation only covers the initial sale of the product to the policyholder, not renewals, and does not apply to reinsurance, captives, wholesalers or managing general agents.

Agent associations are not happy about the new rules.

The Independent Insurance Agents and Brokers of New York was joined by the Council of Insurance Brokers of Greater New York in a suit to stop implementation of the regulation. In a recent opinion piece in National Underwriter (Aug. 16/23, 2010, page 34), Richard A. Poppa, president and chief executive officer of IIABNY, called the regulation "burdensome and unnecessary" and said the department does not have the authority to impose it.

The Professional Insurance Agents of New York have been equally critical, but did not join the suit, opting instead to work with the department and iron out implementation.

Despite the suit, and the lack of a definitive circular letter instructing agents and brokers on how to go about implementation, the chief executives of both IIABNY and PIANY say agents need to be ready come Jan. 1 to implement the disclosure requirements.

Recognizing this reality, both associations have moved ahead with plans to educate their members about implementing the new rules by combining old-style seminars with new media.

"What we found is that there is a lot of confusion [among agents] about what the regulations are," said PIANY's executive director, Diane Fowler. "Nobody likes the regulation. We continue to object to it, and we continue to object to its premise, but if it is going to exist, then we want to make sure people understand what they need to do to be in compliance."

"We are trying to make sure that [producers] are prepared for compliance. Agents can't wait to begin thinking about this during the first week of December," according to Mr. Poppa.

Both associations have plans for a combination of seminars and webinars, in addition to postings on their websites leading up to the implementation date.

Mr. Poppa explained that while IIABNY is confident its suit will prevail, it is not certain the legal wrangling will conclude before the regulation is implemented. For this reason, he said, agents need to prepare to go forward with disclosure come Jan. 1.

"It is so invasive into the independent agent or broker's business that they need two-to-three months advance training so they can integrate it into their sales process and record-keeping," he said, adding that with the added paperwork, agents must identify the "most cost-effective way possible" to pull all the disparate parts of the regulation together.

Both groups have posted information on their website home pages with information and updates on the regulation.

o At IIABNY (www.iiabny.org), a button that reads "Producer COMP Updates" will take users to a page with information about Regulation 194, what the association is doing and classes the group is conducting.

o A PIANY webpage (www.pia.org/COMM/abcd/) also offers information and explanations about the regulation. It features a flow chart that allows producers to proceed through an interactive question-and-answer session aimed at informing producers about what they have to disclose and when.

Ms. Fowler said many agents are under the false impression they have to disclose everything to clients, but that is not the case. The chart takes agents through the disclosure process, illustrating what information needs to be given and under what circumstances.

PIANY representatives said the webpage information is intended for member and non-member agents and brokers. If anyone has difficulty accessing the site, they can contact the office for help.

Mr. Poppa said IIABNY is going further than its web postings, conducting classes on the regulations and sending out e-mails to keep members informed.

In July and early August, the association conducted two webinars, with one hour of continuing education classwork and one hour of Q&A. He said some 600 agencies were involved in the two events, which was free to members and is posted on its website.

Additional compliance seminars will be held in September and November, he said, noting that at press time the association was waiting for compliance approval from the insurance department for some of the forms they plan to distribute. The seminars will be supplemented with webinars for those unable to make the in-person events, Mr. Poppa said. Non-members will be charged a fee for accessing the webinars.

For member agents with licenses to do business in New York but headquartered out of state, materials will be made available to them, he added.

An insurance department representative said out-of-state producers will only have to worry about meeting the disclosure requirements on the business they write in New York. The regulation will not extend to the rest of their writings.

Ms. Fowler said PIANY is preparing to run seminars and educate producers about the regulations but has not set any definitive plans. She said the association wants to see the final, approved circular letter on what the department requires before it publicizes its education and information program.

"I can assure my members that [they] will have everything that they will need to have before this regulation goes into effect," said Ms. Fowler. "We need to see what is in the circular letter to fine tune our education efforts."

She said that if the circular letter is not completed by the insurance department until shortly before the regulation goes into effect, PIANY will seek a delay in the implementation date.

"I believe that our members will be fully prepared to comply with this by the effective date," said Ms. Fowler.

Special Reports /

N.Y. Producer Groups Help Prepare Members For Disclosure Regulations

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