N.Y. Agents Voice Concerns On Producer Compensation Disclosure

A New York state agents association has asked the state's insurance department to make any mandatory producer compensation disclosure regulation more general in nature to avoid forcing agents to disclose information they may not have.

In a meeting with the department, representatives from the Independent Insurance Agents and Brokers of New York (IIABNY), led by Chairman Neal L. Sullivan, raised some concerns about the department's Jan. 29 draft regulation on producer compensation transparency.

Jill Muratori, legislative representative for IIABNY, said the association believes the draft regulation is too specific, and explained that certain requirements would be "difficult or impossible for a producer to do."

For example, she said the draft regulation contains a provision that would require producers to estimate how much compensation they are going to receive when that figure might be unknown in situations such as profit sharing.

"We gave them an idea that perhaps instead of drilling down into the detail that [the department] has in [its] proposal, perhaps a more general type of disclosure that invites a purchaser to ask more questions about compensation would be more appropriate than a blanket detailed compensation disclosure," Ms. Muratori said.

According to IIABNY, the department asked the association to provide an alternative proposal that it believed would be more workable for producers.

Matthew Guilbault, director of government and industry affairs for the Professional Insurance Agents of New York (PIANY), said his association recently sponsored an industrywide summit on the draft proposal. He said life, health and property-casualty agents and companies all met to discuss strategies. The participants agreed the department's draft is "undoable and unworkable" as is, he said.

Mr. Guilbault said one problem he sees is a provision that if an agent considers a number of policies, and presents one to a client based on what the agent feels is best, the agent has to go back and prepare compensation arrangements for every other policy that was considered in the event the client asks for the information. This, he said, could create a lot more work for smaller "mom and pop" agencies.

"It really serves as a disincentive...to offer the consumer the widest breadth of choices," Mr. Guilbault said.

Observers say that any alternative proposal seriously considered by the department would likely have to contain mandatory disclosure, as opposed to voluntary.

Mr. Sullivan said in the IIABNY statement, "It appears that the department is not in support of simply a voluntary disclosure, and IIABNY is engaged with them to rework the language."

Recent comments by New York State Insurance Department Superintendent Eric Dinallo during an editorial roundtable interview at National Underwriter supported Mr. Sullivan's statement. Mr. 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.

A department source also said mandatory disclosure is highly likely to be part of the final regulation.

Mr. Guilbault said the department will be holding four working group hearings on the proposed regulation starting on March 6, and PIANY will participate in them.

A department source said the NYSID has met with "numerous stakeholders" and hopes to have a regulation completed by the end of the year.