This updates our September 15, 2009 blog posting.
One Transparency Rule for All New York Insurance Producers
Matthew Gaul, special counsel for the Department, recently explained that the draft proposal for the disclosure of insurance producer compensation released by the Department last month differs from that proposed by former Superintendent Eric Dinallo in that the revised proposal does not differentiate between captive agents, independent agents and independent brokers.
Former Superintendent Dinallo envisioned a disclosure rule that: (i) did not require much transparency from captive agents, as captive agents are clearly working for a particular insurer; (ii) required more robust transparency for independent agents, as the independent agents should make it clear to the consumer with which insurers the independent agent has a relationship and whom will compensate them; and (iii) required very robust disclosure by independent brokers, as they are arguably employed by the consumer, and therefore must “manage conflicts carefully.”
However, the Department’s current position, as demonstrated in the revised proposal, treats all producers the same. According to media sources, Mr. Gaul stated that the reason why the Department decided not to differentiate between captive agents and independent agents and/or brokers is that many captive agents do not engage strictly in captive transactions. In Mr. Gaul’s view, even though captive agents offer products for a particular insurer, if a client needed coverage not provided by the primary insurer, the agent will often go into the marketplace and act as an independent agent or broker to secure that coverage. Further, Mr. Gaul pointed out that captive agents can have a conflict of interest, even if thy represent one insurer, as that insurer may compensate them differently depending upon which product they sell.
Two Updates to the Proposed Draft
The following two changes were made last week to the New York State Insurance Department’s (the “Department”) revised draft regulation regarding insurance producer compensation transparency:
- The time period for consumers to request additional information about insurance producer compensation would be reduced from three years after issuance of the insurance contract to thirty days after issuance.
- The disclosure requirements are limited to quotes presented rather than quotes obtained.
