NU Online News Service, Nov. 8, 3:41 p.m. EDT
The New York State Insurance Department has released its circular letter providing guidance for its upcoming producer compensation disclosure regulation, but agent groups said questions still need to be worked out before the Jan. 1 implementation.
Matthew Guilbault, director of Government & Industry Affairs for the Professional Insurance Agents of New York (PIANY), said the department guidance is a step in the right direction, and addresses some of PIANY's earlier concerns, but he said the association will be working with the department for further clarification before Jan. 1, when the producer compensation regulation is scheduled to take effect.
Insurance Regulation 194–scheduled to take effect on Jan. 1, 2011–requires producers to disclose certain information about their compensation to all clients. It was developed in response to a 2004 investigation commenced by then State Attorney General Eliot Spitzer, which found that brokers placing commercial insurance were taking undisclosed payments that served as kickbacks for steering clients to insurers involved in a price fixing ring.
Mr. Guilbault said the biggest issue addressed in the circular letter is clearing up how producers should handle secondary disclosures. Primary disclosure requirements, he said, are "pretty clear," but he said the level of detail for secondary disclosure has caused some confusion for PIANY members.
The recent guidance offers some clarification, Mr. Guilbault said. He pointed to language in the circular letter that states, "A producer is not required to disclose detailed compensation structures but must provide a description of the circumstances that may determine the receipt and amount or value of any compensation not known at the time of disclosure. For example: 'I may also be eligible for additional compensation depending upon a number of factors including premium and policy volume, losses and profitability.'"
Still, Mr. Guilbault said questions remain, particularly concerning the timeframe during a transaction where producers must comply with the regulation.
Meanwhile, Tim Dodge, a spokesman for the Independent Insurance Agents and Brokers of New York (IIABNY) said he did not see many changes in the circular letter from a draft letter the department released in August.
He said the changes that were in the recent letter were "underwhelming" and did not address the big questions.
IIABNY, along with the Council of Insurance Brokers of Greater New York (CIBGNY) are involved in a lawsuit against the NYSID to prevent implementation of the regulation. The groups contend the regulation is burdensome, confusing and unnecessary.
Mr. Dodge said oral arguments were presented on Oct. 15 in the New York State Supreme Court in Albany, N.Y. He said IIABNY has asked the judge for an expedited decision.
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