IIABNY: Threatened Lawsuit Depends On N.Y. Regulator's Next Step

NU Online News Service, Jan. 19, 3:47 p.m. EST

Controversial compensation disclosure rules proposed by the New York State Insurance Department could still spark a lawsuit if that agency fails to make changes, an agent group said.

That reaction from the Independent Insurance Agents and Brokers of New York (IIABNY) followed the closing of a comment period on the new regulation, which the department said drew thousands of responses.

The proposed regulation was developed in response to a 2005 New York attorney general's investigation revealing that some commercial insurance brokers took hidden payments to steer clients to insurers involved in a bid-rigging scheme.

The department, in its published rule, states, "The proposed regulation is intended to provide a means to address the potential conflict that arises due to the differences in the amount of compensation an insurer pays to its producers in the least invasive manner possible–by requiring that insurance producers make certain disclosures about their role in the insurance transaction and compensation arrangements with insurers to insurance customers."

IIABNY announced last month that it disagreed with mandatory disclosure, and threatened a lawsuit if the department moved forward.

The association said it particularly took issue with a requirement in the rule stating that a producer must disclose his or her role–whether the producer is legally representing the insurer or buyer in a transaction. The organization said this requirement adds no value and could be confusing to the buyer.

IIABNY spokesman Tim Dodge said today that the association will wait to see what the department does before settling on its own course of action, but he noted the threatened lawsuit remains an option.

"I would say if the final version of the rule is identical to or very similar to [the published rule], that makes it more likely we would proceed with the legal action," he commented.

The department said it received 2,226 comments during the 45-day comment period on the proposed regulation and is currently in the process of reviewing them.

The Professional Insurance Agents of New York (PIANY) said in a statement that it submitted a comment reiterating its "fundamental objection that any regulation to mandate disclosure would be unnecessary and an undue burden to honest insurance agents and brokers."

PIANY President Kevin M. Ryan said in a letter on behalf of the association, "In fact, as we've pointed out repeatedly, the department has not offered to share any documented harm relative to the actions of Main Street agents and brokers that would justify the adoption of a disclosure mandate."