Maryland Insurance Commissioner Ralph S. Tyler plans to explore whether to force agents to disclose commissions and other compensation for each insurance transaction.

Following the lead of regulators in New Jersey and New York, Tyler said it is “something we need to look at and strongly consider.”

Ralph S. Tyler

The commissioner said he plans to hold a forum on the issue of insurance agent and broker commission disclosure before making any decisions on possible regulations.

“I plan on inviting people to come and discuss the reasons as to why we should or should not follow a similar plan and adopt regulations to mandate appropriate disclosures,” he said. “This is something we should do and information consumers should have.”

The invitation is being welcomed by the Independent Insurance Agents of Maryland, according to the group’s legislative committee chairman, John Darlington.

“We are encouraged by the commissioner’s attitude of collaboration and we’d love to have a conversation with him before the regulations are promulgated so we can share our point of view with him,” Darlington, a vice president with Willis HRH, said. “Personally, I don’t think agents or brokers would find disclosure of income anything but a good idea.”

Others taking action

In January, a new law took effect in New Jersey whereby producers selling health insurance in the state must disclose any compensation received in conjunction with the sale. Producers must disclose the commission of the issuing agent, the general agent, consultant fee, brokerage fee and any other fees as both a percentage and as an amount in dollars per covered employee, according to the law.

In New York, Insurance Superintendent Eric Dinallo recently issued a draft regulation on agent and broker compensation and disclosure, which has met with mixed reaction in the industry. The regulation would apply to new and renewal contracts and include written disclosure of all compensation or other material ownership interest.

Tyler said the trickle-down effect of state regulation is “not the way this should work,” and instead, he encourages his staff  “to think of the laws and regulations in effect, ask why they are there and then ask what rules should there be.”

“Together, we work to make the system stronger and more effective,” he said.

Tyler added that there have been no complaints by consumers regarding compensation, but since it is not currently disclosed, they may not call or write the Maryland Insurance Administration about the matter.

This story originally appeared in the May 2009 print edition of Insurance & Financial Advisor.