CIAB Lauds NY's Guidance On Anti-Rebating Laws

The Council of Insurance Agents & Brokers on Wednesday praised New York Insurance Superintendent Eric Dinallo for the release of Circular Letter 9, which provides producers with guidance on permissible activities under New York's anti-rebating laws.

CIAB said it worked with Superintendent Dinallo and regulators at the New York State Insurance Department to bring a more cohesive and straightforward approach to the types of value-added services producers may provide to their clients that remain within the confines of state anti-rebating laws.

The issuance of the letter is "one more step toward modernizing an insurance regulatory regime that has sometimes not kept pace with the realities of business today," CIAB said.

CIAB President Ken A. Crerar said in a statement: "We thank Superintendent Dinallo for bringing clarity to what has increasingly become a compliance nightmare for our members. This circular letter is great news for commercial insurance consumers as well."

He noted that the department's approach "protects consumers and allows producers to provide the value-added services their commercial customers have come to expect in today's marketplace. It also provides a flexible framework for evaluating the permissibility of offering value-added services in the future that may not exist today."

Superintendent Dinallo noted shortly after taking office that the current anti-rebating regime needed reform. The CIAB said it discussed with the department some proposed solutions for clarifying which activities do not run afoul of the anti-rebating laws.

The Circular Letter issued by the department represents "much-needed reform to an anti-rebating regime that has not kept pace with the evolution of value-added services offered by producers," CIAB said. The guidance offered in the letter will benefit commercial insurance clients by making it clear what services producers can offer to those clients--services which they may have hesitated to offer in the past for fear of violating the anti-rebating laws.

The action by Superintendent Dinallo "provides a workable framework for analyzing whether services provided by a producer run afoul of the anti-rebating laws that will stand the test of time. We thank Superintendent Dinallo for adopting this principles-based approach, which has been a hallmark of his tenure in office," Mr. Crerar added.

New York has issued more than 170 opinion letters over the years that provide fact-specific interpretations--some of them in conflict with others--of which producer activities run afoul of the anti-rebating laws. CIAB members identified these conflicting interpretations as having a chilling effect on the types of value-added services they offered to their clients, including risk assessment and management, claims assistance, insurance consulting and COBRA benefits administration, the organization said.

Circular Letter 9 provides clarification that insurance producers may provide a service to the client that is not specified in the insurance policy if two conditions are met:

o The service directly relates to the sale and servicing of the policy or provides general information about insurance risk reduction.

o The producer provides the service in a "fair and nondiscriminatory manner to like" customers.

Several other states have been examining the application of their anti-rebating laws in recent months, the organization said, adding that it hopes those states will "take note of the balanced approach taken by New York and consider adopting similar provisions."