N.Y. Agents Groups Caution Over Burdensome Compensation Regs

New York independent agent groups reacted with concern that compensation disclosure rules proposed by the state's insurance department could become an unworkable burden on producers, but the three major insurance brokerage firms applauded the proposal.

Representatives from the Independent Insurance Agents & Brokers of New York and the Professional Insurance Agents of New York said while they do not have a problem with disclosure, they do not want to see a requirement for disclosure become an undue obligation.

"Agents and brokers should voluntarily disclose compensation upon client request, but [the association is] opposed to any additional burdensome requirements on agents and brokers," the Dewitt, N.Y.-based IIABNY said in a statement.

"We have no problem with disclosure," said Matthew Guilbault, director of government and industry affairs for the PIA of New York, based in Glenmont, N.Y. "We are concerned if [the regulations] are overly burdensome."

Both groups said they are in discussions with the insurance department about the regulations and are hopeful their concerns can be resolved.

The four-page draft does not prohibit compensation or contingency arrangements between producers and their insurance company, IIABNY noted.

Mr. Guilbault said one concern the association has is that the draft regulations do not inform clients that commissions producers receive from carriers cannot be rebated in any way to the client to reduce their premium. There is also no differentiation between an agent and broker in the rules, he said, which is also a concern.

The New York State Insurance Department sent out copies of the draft regulation yesterday seeking input as they are developed from consumer and industry groups and other interested parties, a department spokesman said.

The four-page regulation sets out who has to disclose and includes a sample notice of what that disclosure to clients should say. The language refers to producers, not agents or brokers. The regulation would exempt direct agents, reinsurers, wholesalers and captives from needing to disclose.

In an editorial roundtable interview at National Underwriter yesterday, New York Insurance Superintendent Eric Dinallo said anyone handling financial services products needs to provide comfort to clients that there is total transparency, and that any regulations would be designed to that end.

"There needs to be pure transparency, and I do not see any question about it," he said.

Among the brokers supporting the regulation is Joe Plumeri, chairman and chief executive officer of Willis Group Holdings. He said he commended the superintendent for "taking this important step to protect the interests of insurance buyers."

He called the regulation a "validation of our firmly held position" and added he hoped it would lead to an industry-wide standard.

"We fully support Superintendent Dinallo's efforts to create a level playing field," said Brian Duperreault, president and CEO of Marsh & McLennan Companies. "We look forward to continuing to work closely with the New York authorities to establish an equitable regulatory landscape that serves the interests of all clients."

David Prosperi, vice president of global public relations for Aon Corp. said, "Aon believes all brokers and agents should at a minimum be willing to tell their clients who will pay them, how much they will make, and the quotes producers provide. This is the basic information every client deserves."

He added that the firm believes the current draft regulations do not go far enough and should require an "enhanced discussion" about contingent commissions.

The four biggest insurance brokerage firms--Marsh & McLennan, Aon, Willis, and Arthur J. Gallagher Corp.--gave up taking contingency fees and agreed to disclose their compensation arrangements in 2004 after then New York Attorney General Eliot Spitzer uncovered evidence that profitable volume base contingent commissions served kickbacks for cooperating with insurers in a bid rigging scheme.