NEW YORK–Changes in regulation governing broker compensation should not interfere with the ability of producers to make money, a key New York State assemblyman said.
Assemblyman Joseph D. Morelle, D-Rochester, who heads the Assembly Insurance Committee, made his remarks here Friday in an address to the Professional Insurance Agents of New York's annual Metropolitan Regional Awareness Program in Brooklyn.
He said while the State Department of Insurance is working on regulations governing broker compensation, the rules should not impact the way brokers earn a living.
"I do not believe in intrusion into people's economic lives," he said.
He said the regulations must strike a balance between consumer protection and business growth.
Mr. Morelle, whose party holds a majority in both houses of the legislature in Albany, said if the department oversteps what the legislature feels is an appropriate amount of regulation, the legislature will step in to correct the department.
In an interview with National Underwriter, Mr. Morelle said the Assembly Insurance Committee has sent to the insurance department some proposals on what appropriate rules on broker compensation should look like.
He would not get into specifics of the proposals. However, he did say the rules need to strike a balance between guiding consumers in their purchase of insurance "in any meaningful way" and the disclosure of broker compensation.
Mr. Morelle noted that there are plenty of opportunities for buyers to get competitive bids from other brokers and make comparisons in their buying decision. If competition did not exist, then there would be a need for more stringent broker disclosure, he said.
During his talk, Mr. Morelle touched on the issue of credit default swaps (CDS), which have led a number of businesses into economic trouble and aggravated the current economic crisis.
He said such investment vehicles acted like insurance but did not have reserving in place, as insurance products do, nor were they regulated by insurance regulators.
The assemblyman said the states should play a greater role in areas of financial regulation such as these, noting that while the American International Group got into trouble over CDS, its insurance arm remains strong.
Discussing his comments on CDS with National Underwriter, he said states need to take a serious look at regulating them as an insurance line.
"It is a financial guarantee instrument and at the end of the day there is expected to be a payment," Mr. Morelle told National Underwriter. "I want to make sure there is a payment."
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