Washington
Any legal challenge to block New York's compensation disclosure rule for insurance producers will likely fail, but a lawsuit might delay implementation, a former regulator told agents and brokers meeting here.
Attorney Richard C. Hsia, a past New York deputy insurance superintendent, made his comment during the recent Independent Insurance Agents and Brokers of America Diversity Luncheon, held in conjunction with IIABA's annual Legislative Conference and Convention.
Mr. Hsia–who is now executive vice president and general counsel for Wright Risk Management and vice president of the Chinese American Insurance Association–said a lawsuit to block the rule would fail because the department has the authority to regulate compensation.
The Independent Insurance Agents and Brokers of New York said last month it would take legal action to fight the regulation, which goes into effect on Jan. 1, 2011. IIABNY contends the new rules would place an undue burden on agents, and that the department did not have the authority to promulgate them.
But the New York Insurance Department does indeed have authority over producer compensation, and is within its rights to put out rules governing insurer payments, according to Mr. Hsia, predicting that any IIABNY action arguing otherwise would probably not succeed.
However, while the rules are slated to go into force with the start of the new year, Mr. Hsia said he believes the actual effective date will ultimately be up to the courts.
He suggested that a judge could render an opinion that could send the matter to a higher court for an appeal, delaying implementation of the new regulation.
Last month, New York Insurance Superintendent James J. Wrynn approved the new regulations for producer compensation, which would require agents and brokers to explain their role in the transaction, how they are paid, and provide any additional information the customer requests. It also requires agents to maintain records of the disclosure to the customer.
Interviewed after his talk, Mr. Hsia said he believes that Mr. Wrynn had gone far and above what was necessary to draw up the regulations while taking into consideration agent concerns and incorporating them into a rewrite of the proposed regulations.
He said that while it remains to be seen how agents and brokers would adapt to the new "administrative burdens," he believes Mr. Wrynn made a tremendous effort to accommodate producer concerns.
Meanwhile, the nation's leading group of commercial insurance buyers–the Risk and Insurance Management Society–has criticized the disclosure rules as not being stringent enough.
A second speaker at the Diversity Luncheon said that insurers looking to remain relevant and successful in an increasingly diverse society must foster a representative employee and client base.
Harold L. Morrison Jr., executive vice president and chief global field officer for the Warren, N.J.-based Chubb Group, said companies have to pay greater attention to the issue of diversity in terms of gender, race and ethnicity, as well as for those with various disabilities.
He said the challenge is for the industry to develop a business that reflects the wide variety of clients the company is dealing with or plans to target.
"Today, companies can't do without attracting and retaining the very best talent available and the broadest pool available," said Mr. Morrison. "And insurers like Chubb, who depend on independent agents and brokers to sell our products, can't do that without extending a hand to diverse partners who have insights into relationships that we don't."
Mr. Morrison said three things have changed since he began in the insurance industry back in the 1980s:
o Diversity programs no longer lack focus and specificity, and where once they were concerned with just attracting women and minorities, they now have a broader range of ethnic and social views concerning who they want to recruit, including people who are gay, those with disabilities and those from diverse ethnic backgrounds.
o Second, demographic shifts have made the question of diversity a "business imperative," with the aim of protecting profit centers and looking for areas of expansion.
o Third, companies need to respond to customer expectations, and without taking into consideration questions of diversity, insurers can expect to lose business, while those that have dealt with the issue stand to become more profitable companies.
"Diversity and innovation are tied hand-in-hand," he noted. "If a company does not value diversity, the company loses, and no one wants to be with a loser."
He said Chubb has dealt with this issue for decades, recruiting, developing and building alliances with diverse groups, while continuing to actively pursue both new markets and new talent.
He said he is encouraged by the changes he has seen during his time in business, adding that he expects the industry to continue to evolve for the benefit of agents and insurers.
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