RIMS Commends N.Y. Disclosure Rules, Wants Contingents Banned

The Risk and Insurance Management Society commended the New York State Insurance Department for its proposed regulations governing producer compensation, but said it ultimately wants to see a ban on all contingent commissions.

The New York-based risk managers association issued a statement today saying, "While the proposal falls short of a flat-out prohibition of contingent fees for all insurance producers and maintains the two-tier system, RIMS views the regulation as a step forward in ensuring complete transparency in the process.

"Complete disclosure of compensation arrangements goes a long way toward promoting transparency and re-establishing trust between the broker and consumer, while also providing the consumer with sufficient information to evaluate potential conflicts of interest in the placement of insurance policies.

"However, RIMS believes that this is only a first step toward complete transparency as contingency fees continue to present an inherent conflict of interest between the broker and the insurance purchaser. RIMS reaffirms its position that contingency fees should be broadly prohibited."

On Wednesday, the department passed along a draft proposal of its regulations with the intention of soliciting opinions and input from industry and consumer interests.

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