A collection of insurance industry trade groups expressed their concerns to New York regulators about potential confusion caused by provisions in the new proposed agent disclosure requirements.

Representatives of the Independent Insurance Agents & Brokers of New York, the Professional Insurance Agents of New York, the New York Insurance Association, the Council of Insurance Agents & Brokers, and the Council of Insurance Brokers of Greater New York attended a recent meeting to discuss proposed disclosure requirements in New York.

The groups’ comments are part of those being collected by the New York State Insurance Department during a public comment period on the proposed regulations. That public comment period ends July 29.

Earlier this month, the New York State Insurance Department proposed new rules regarding agent and broker commission, suggesting that agents must disclose compensation when asked by the consumer. That approach is a shift from its earlier draft regulation, released in January, which would have required full disclosure of all compensation paid to any agent or broker in all insurance transactions.

Tim Dodge

The groups told New York regulators that the definition of compensation is “too broad,” according to Tim Dodge, director of research and external communications for the IIABNY.

The trade groups also raised concerns about the required disclosure as to which party the agent represents. In some cases, Dodge said, the producer doesn’t know at first whether he will be acting as the agent, broker or both.

Dodge gave the example of a producer who is providing quotes for liability, property, auto and umbrella coverage from one of the companies he represents, but the best coverage solution for workers’ compensation might be the New York State Insurance Fund, which deals only with brokers.

“The distinction can be muddy,” Dodge said.

The description of alternative quotes that a producer would have to disclose to a client also raised questions for agents. Dodge gave the example of an agent who represents 10 companies and knows only three of them would have product offerings that would be competitive for a particular client. He inquired whether the agent has to disclose to the client how much he might have been paid by those seven companies that will not be included in the bid.

The trade group had concerns about the lack of a time limit imposed on a policyholder to request disclosure of alternatives. The language in the proposed rule includes quotes received during the life of the relationship, which could raise issues if the client and agent have a long-term relationship, Dodge said.

The actions of New York, where issues of broker compensation were first raised under former Attorney General Eliot Spitzer several years ago and were the subject of hearings before the New York State Insurance Department and New York Attorney General Andrew Cuomo’s office, could lead to other states considering similar regulations. Recently, regulators in Maryland, Washington, D.C., and Delaware have told IFAwebnews.com they intend to investigate possible regulations, while officials in Virginia and Pennsylvania say they have no immediate plans for similar regulations.