NU Online News Service, Nov. 19, 3:50 p.m. EST
The New York State Supreme Court in Albany County has rejected the arguments of two agent associations that the state insurance department's planned producer compensation disclosure regulation is arbitrary and unnecessary.
The agent groups–the Independent Insurance Agents and Brokers of New York (IIABNY) and the Council of Insurance Brokers of Greater New York (CIBGNY)–also argued that the state's insurance law does not grant the superintendent the authority to promulgate the regulation.
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.
IIABNY and CIBGNY announced plans to fight the regulation in court on May 27.
The court ruled that the petitioners failed to show that the regulation is inconsistent with the relevant insurance law, or that the superintendent has exceeded his authority.
Judge Richard Platkin further ruled that the superintendent has not created a solution for a problem that does not exist, as petitioners argued.
Judge Platkin noted that the department had issued a circular letter on undisclosed compensation as early as 1998, and that the superintendent's action on the regulation was a direct result a joint 2004 attorney general/insurance department investigation into allegations of improper steering.
Andy Mais, a spokesman for the department, said the superintendent is "pleased that the court recognized that the regulation was a proper exercise of the superintendent's discretionary authority and of his ability to protect consumers."
He added, "We look forward to working with all parties on [the regulation's] implementation."
Richard Poppa, president and CEO of IIABNY, said he appreciates the court's quick decision on the matter, as oral arguments were heard on Oct. 15, but said he disagrees with the outcome.
He said he believes the court overlooked and glossed over some important issues, including the depth of disruption the regulation will cause with respect to fulfilling the disclosure requirements.
He said he will be meeting with IIABNY's board on Monday to discuss the matter and decide the association's next step.
But Mr. Poppa said IIABNY members are largely in favor of the association continuing its attempts to block the regulation.
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