N.Y. Compensation Rules Would Burden Them, Some Agents Say

NU Online News Service, Sept. 11, 3:49 p.m. EDT

Producer group representatives said changes made to the proposed New York compensation regulation have improved the rule, but aspects of it could still burden their members.

Several points need to be addressed before the regulation announced yesterday is made permanent, they said.

Michael Barrett, legislative representative for the Valley Stream, N.Y.-based Independent Insurance Agents & Brokers of New York said the association continues to talk to government officials about elements of the new regulation that still raise concern.

The newly-released proposed regulation would require producers to inform clients of the details of their compensation upon the client's request. Under the rules, producers will inform clients of their right to ask for the information and keep records of refusal or disclosure for up to three years.

Mr. Barrett called a recent meeting with state officials "productive," but two aspects of the regulation need to be clarified.

Currently, Mr. Barrett said, producers have to explain to customers whether they are an agent or a broker and how that affects their compensation. While both act in the best interests of their customer, he said, because agents are representatives of a company, the association fears the explanation could lead to consumer's confusion.

As a practical matter, producers should not have to explain the distinction and should just explain the nature of their compensation, he said.

"Why get into something that doesn't matter to the relationship," he said.

He also voiced concern over language governing renewals, saying there needs to be clarification as to how it applies to the personal and commercial lines relationships.

"We would like to think that these issues can be resolved," said Mr. Barrett.

Wesley Bissett, senior vice president for government affairs for the Independent Insurance Agents & Brokers of America said the proposed regulation have negative implications nationally.

"We are disappointed; this is a big problem and concern for us," said Mr. Bissett.

He called the regulation a burden, citing the same concern as Mr. Barrett over explaining the agent and broker relationship. Legally, he did not see how any producer could explain the relationship, whether they are acting in the interests of the carrier or the consumer, since they may be doing both jobs interchangeably.

"It forces the agent to make a disclosure that they are unable to make," said Mr. Bissett. "It is putting agents in a legally untenable situation."

The rule "also exacerbates the lack of uniformity at the state level" he continued, because no other state has a rule similar to this or is contemplating it. The regulation would also affect thousands of out-of-state agents who write business in New York, he said; he remained hopeful changes can be made.

"The things we are asking for are not unreasonable by any stretch, but they are significant," remarked Mr. Bissett.

In an e-mail, Kenneth R. Auerbach, president of the National Association of Professional Insurance Agents, said the association is working with the New York PIA, which has taken the lead on the issue.

Mr. Auerbach said from the outset the association "has held that additional regulation about compensation disclosure in New York is unnecessary," but worked with state officials nevertheless. The association is pleased with the current progress of discussions and plans to continue.

He added that he did not see national implications for the regulations to spread further.

Nicole Allen, vice president of industry affairs for the Council of Insurance Agents & Brokers, said the regulations are consistent with the association's position that compensation disclosure "is good for the long term and good for business."

However, some portions of the regulations still need clarification, similar to what was cited by Mr. Barrett and Mr. Bissett. She credited the department with broadening some aspects of the regulation, especially concerning estimating future compensation that makes it easier for agents to make the disclosure.

She said it does not appear that expansion of compensation disclosure regulations has much appeal outside of New York.

"We haven't seen any movement to get this on a nationwide basis," said Ms. Allen. "For us, uniformity is a big deal because our members are doing business across state lines and we like to see state laws as uniform as possible, but [regulators] have not gained any traction on this and I don't know if they will now."

The regulations come in the wake of a New York Attorney General's investigation in 2005, which found misconduct among major brokers selling commercial insurance, who were involved in rigging bids and received contingent payments for steering business to certain insurers.