An insurance industry trade group has renewed its call to New York regulators to halt plans to implement new broker compensation disclosure rules.

The Professional Insurance Agents of New York State made the request at the close of the 45-day comment period on proposed regulations. The group, representing independent insurance agents, brokerages and their employees in the state, said the rules are “unnecessary and an undue burden to honest insurance agents and brokers,” according to a statement.

The New York State Insurance Department plans to implement rules later this year forcing agents to disclose the compensation they receive as brokers from insurance carriers in most cases.

The proposed regulation of broker compensation is being watched closely by some other states, which may implement their own rules if New York regulators are successful. New York’s campaign for broker compensation rules began two years ago, with hearings before the state insurance department and attorney general’s office regarding whether a need existing.  A draft proposal was issued in January 2009, but then heavily rewritten and re-released later in the year.

Seeking modifications

The PIANY and other trade groups have been working together to obtain modifications to the rules. But in December, the Independent Insurance Agents & Brokers of New York threatened to sue to halt the enforcement of the rules, saying the superintendent does not have legal authority to compel compensation disclosure.

Kevin Ryan

The PIANY continues to argue that no need exists for legislation.

“In fact, as we’ve pointed out repeatedly, the department has not offered to share any documented harm relative to the actions of Main Street agents and brokers that would justify the adoption of a disclosure mandate,” said PIANY President Kevin M. Ryan in his letter on behalf of the association.

The trade group also argued that the state’s insurance department would be overstepping its statutory authority by imposing such a mandate and that the cost of compliance “would far outweigh any benefit the regulation would provide to consumers.” The group said it believes the regulation could “serve as a disincentive for independent insurance producers to conduct market-wide searches on behalf of their clients to present the widest possible choice for their insurance coverage.”

An ‘impossible burden’

The association said the proposed regulation would put a “near impossible burden” on its members because of its “overly broad definition of compensation.”

The draft regulation fails to address “the need to be flexible regarding an appropriate time for disclosure” and fails to recognize that “a producer may commonly act as both an agent and a broker in an insurance transaction,” according to its statement.

The group also wants regulators to clarify disclosure requirements for out-of-state policies with incidental New York coverages, and address the cost and burden of compiling and retaining records, and the need to fully exempt renewals.

“As these examples show, there are myriad compliance questions that are of tremendous concern and consequence to PIANY members. And, more questions surface all the time,” the PIANY letter said.

The new rules stem from charges then-New York Attorney General Eliot Spitzer filed against Marsh and other large brokers in 2004 over alleged bid-rigging and steering of business to insurers that paid contingent commissions. Marsh eventually paid a large settlement to its clients, and two Marsh executives were convicted of restraint of trade.