Broker group to sue over insurance commission disclosure rule

The Independent Insurance Agents & Brokers of New York Inc. will proceed with legal action to try to stop a New York Insurance Department producer compensation regulation from taking effect, the DeWitt, N.Y.-based group announced Wednesday.

The final version of the regulation, which was published in Wednesday’s edition of the New York State Register, requires insurance producers to disclose to their clients certain information about how insurers companies and others compensate them. The rule is slated to take effect Jan. 1, 2011.

New York’s Producer Compensation Transparency regulation requires agents and brokers to disclose to insurance buyers: their role in an insurance transaction; whether they will receive compensation from an insurer based on the sale; that compensation insurers pay to agents or brokers may vary depending on the volume of business done with that insurer or its profitability; and that the purchaser may obtain more information about the compensation an agent or broker expects to receive from a sale by requesting that information from the agent or broker.

The rule is a revised version of a proposal the department published in December, at which time IIABNY said that it was considering taking legal action to block the regulation’s implementation.

“IIABNY has a responsibility to represent and to protect the interests of its members, and our members have unanimously and vociferously told us that this rule is unnecessary, ineffective and overly burdensome to their businesses,” said Dick Poppa, president and CEO of IIABNY, in a statement announcing the action. “We cannot sit back idly and let the department impose an unnecessary rule that will only serve to add another time-consuming and costly requirement for our members, which in turn could also result in additional costs to consumers.”

This story appeared in Business Insurance, an InvestmentNews sister publication