NU Online News Service, Aug. 17, 4:09 p.m. EDT
The New York State Insurance Department (NYSID) has distributed an advance copy of a draft circular letter on its planned producer compensation disclosure rule to agent groups but excluded those groups that are challenging the regulation through a lawsuit.
Ron Klug, department spokesman, said the department was in dialogue with the groups–the Independent Insurance Agents and Brokers of New York (IIABNY) and the Council of Insurance Brokers of Greater New York (CIBGNY)–before the lawsuit, but he said the lawsuit "makes continued dialogue impossible."
IIABNY and CIBGNY filed a joint legal action on May 24 to prevent the department from implementing its producer compensation disclosure rule, arguing that it is a burdensome and confusing regulation.
Mr. Klug noted that the department did receive suggestions from the two groups as it developed the draft circular letter–which clarifies how producers should comply with the regulation when it goes into effect Jan. 1, 2011–and he said the department reviewed and considered those suggestions. But, he said, the department is not in active dialogue with IIABNY and CIBGNY because of the legal action.
Mr. Klug said the draft circular letter will be posted on the NYSID website later this week.
According to Matthew Guilbault, director of Government and Industry Affairs for the Professional Insurance Agents of New York (PIANY)–which is not a party to the lawsuit against the department–the circular letter explains how the regulation will be implemented, clearing up concerns brought to the department's attention during ongoing dialogue.
He said the letter is a "great first step" toward providing clarity for producers. He noted that while PIANY still has fundamental objections to the disclosure rule, the association will continue its dialogue with the department so that members can be confident in their ability to comply if the regulation does go into effect.
The biggest issue resolved in the letter, Mr. Guilbault said, is clearing up who a "producer" is for the purposes of disclosure. He said there are many scenarios where more than one "producer" may interact with a policyholder, and there was confusion as to when disclosure obligations apply. The circular letter, he said, offers some clarification.
With respect to issues not resolved by the circular letter, Mr. Guilbault said clarity is still needed regarding what type of compensation needs to be disclosed. The regulation, he said, states that producers must disclose compensation based on the sale of a policy, but Mr. Guilbault said agents are unclear on how to determine that threshold.
Both Mr. Guilbault and Mr. Klug noted that the dialogue between agents and the department is ongoing and positive, and they said the current circular letter is only a draft that will be discussed further.
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