New York independent agent groups are concerned that compensation disclosure rules proposed by the state insurance department could become an unworkable burden on producers, but three mega-brokerage firms applauded the proposal.
"We have no problem with disclosure," said Matthew Guilbault, director of government and industry affairs for the Professional Insurance Agents of New York. "We are concerned if [the regulations] are overly burdensome."
"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 Independent Insurance Agents and Brokers of New York said in a statement.
Both groups said they are in discussions with the insurance department about the regulations and are hopeful their concerns can be resolved.
The department's four-page draft does not prohibit compensation or contingency arrangements between producers and their insurance companies, 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.
The insurance department sent out copies of the draft regulation seeking input from consumer and industry groups and other interested parties. The draft, which includes a sample notice of what a disclosure statement to clients should say, would exempt wholesalers and captive agents.
New York Insurance Superintendent Eric Dinallo–during a recent, exclusive interview with National Underwriter editors at the magazine's Hoboken, N.J., editorial headquarters–said anyone handling financial services products needs to provide comfort to clients that there is total disclosure 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," Mr. Dinallo said.
That sentiment was seconded by the major national brokers.
David Prosperi, vice president of global public relations for Aon Corp., said his firm "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 Aon believes the current draft regulations do not go far enough and should require an "enhanced discussion" about contingent commissions.
Joe Plumeri, chairman and chief executive officer of Willis Group Holdings, 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," adding he hoped it would lead to an industrywide 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."
The four biggest insurance brokerage firms–Marsh, Aon, Willis and Arthur J. Gallagher–gave up contingency fees and agreed to disclose compensation arrangements in 2004 after New York's attorney general at the time, Eliot Spitzer, uncovered evidence that volume-based contingent commissions served as kickbacks from insurers in a bid-rigging scheme.
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