The New York Insurance Department published the final version of its regulation regarding the transparency of insurance producer compensation (“Regulation 194”) in the New York State Register on February 10, 2010. Regulation 194 is slated to take effect January 1, 2011, but the Independent Insurance Agents and Brokers of New York (the “IIABNY”) has recently announced its decision to proceed with legal action in order to prevent Regulation 194 from taking effect. To view the IIABNY press release announcing its plans, click here.
As we have previously covered here, Regulation 194 has undergone numerous changes. In its final version, Regulation 194 requires producers to disclose certain compensation information to purchasers before they apply for a policy, including: (1) a description of the producer’s role in the sale; (2) whether the producer will receive compensation from the selling insurer or another third party; (3) that the compensation paid to the producer may vary depending on a number of factors, including the insurance contract and the insurer that the purchaser selects; and (4) that, upon request, the purchaser can obtain information from the producer regarding the producer’s expected compensation for the sale, as well as expected compensation for any alternative quotes presented by the producer.
Dick Poppa, IIABNY president and CEO, explained the group’s decision to sue, stating, “Our members have unanimously and vociferously told us that this rule is unnecessary, ineffective, and overly burdensome to their businesses.” The IIABNY intends to challenge Regulation 194 as an undue burden on its members and to challenge the New York Insurance Department’s authority to promulgate Regulation 194.