New York’s insurance department has submitted new rules on producer compensation transparency to the governor’s office, moving it one step closer to becoming regulation.

After a first draft was proposed in January, the latest proposed regulation calls for agents and brokers to disclose any and all commission on insurance policies they write.

Other states have said they are watching New York’s handling of the situation and may consider taking similar steps to regulate agent and broker compensation.

The proposed regulation in New York has met with opposition from state agents’ groups, including the Independent Insurance Agents & Brokers of New York, which says it still has concerns about the pending regulation.

James J. Wrynn, acting superintendent of the New York State Insurance Department, announced that he submitted the latest version of the new rule to the governor’s office of regulatory reform for its review. If approved by that office, the proposed regulation must be published in the New York Register, starting a 45-day formal public comment period for insurance department review.

After reviewing comments, the insurance department can adopt, revise or withdraw the proposed regulation, which it said is the result of “extensive outreach” to the insurance industry and consumer groups.

The regulation has undergone three rewrites, including the latest version submitted to the governor’s office. In July, the department decided to omit a stipulation calling for automatic written disclosure tied to any new policy or renewal. Instead, the NYID said it would require oral or written disclosure by a producer only if requested by the purchaser.

The version sent to the governor’s office Sept. 10 maintains that language and makes other changes, including spelling out the ways producer compensation can vary, such as by contract, by volume of business the producer provides the insurer or “the profitability of the insurance contracts that the producer provides to the insurer.”

The latest version of the regulation also omits exemptions for contract renewals and gives a purchaser up to three years after issuance of a policy to request written disclosure of compensation. If at any time disclosure is made orally, an agent or broker must follow it up in writing as well.

The IIABNY said it met with state officials in the governor’s office in Albany, N.Y., on the day the regulation was released, indicating “significant concerns,” according to a statement.

The group described its hour-long meeting, attended by former chairman Mark J. Hagan, Kathy Weinheimer and legislative representatives Michael Barrett and Jill Muratori, as “positive” and a “good discussion.”

“While IIABNY, working with other industry groups and the insurance department, has been able to make meaningful changes to improve the rule, we still have significant concerns about certain aspects of it,” the agents’ group said in a statement. “We expect to follow up with the governor’s staff and others as the process of readying the rule for publication unfolds.”

Diane Fowler

Diane Fowler, executive director of the Professional Insurance Agents of New York State, said that from the onset, her group has felt additional regulation on compensation disclosure is “unnecessary.” The PIANY also recently met with the governor’s office to discuss the pending regulation.

“When it became apparent that this regulation is inevitable, we worked closely with the insurance department to ensure that the final draft is both beneficial to consumers, and feasible for agents,” Fowler said in a statement. “In this context, we are pleased that the information required to be disclosed in the final product is not dissimilar to what agents currently provide to their members.”

In light of New York’s work to tighten disclosure on agent and broker commissions, neighboring states such as Maryland and Delaware and the District of Columbia have told IFAwebnews.com that they plan to investigate imposing new broker disclosure regulations.

New York’s regulation was developed following hearings last summer on the matter with the insurance department and the state’s attorney general, Andrew Cuomo. The entire matter came from settlements with several brokers and insurers three years ago in a large-scale bid-rigging and contingent commission scandal in the state.