The new agreement with the Big Three ends the prohibition established under the 2005 settlements that barred them from accepting contingent commissions from insurance companies. The 2005 settlements were the result of several investigations led by former New York Attorney General Eliot Spitzer into anti-competitive behavior involving bid rigging and the payment of hidden commissions. In addition, under the new agreement, the Big Three will have to maintain their compliance programs that ensure there will be no repeat of the issues that gave rise to the 2005 settlements.
The Department’s new producer compensation disclosure regulation, currently adopted for January 1, 2011 implementation, requires agents and brokers to describe their role in an insurance transaction (i.e., who they represent) and how they are compensated. If an insured or prospective insured request further information, the agent or broker will have to provide a response within a certain time period.
For unrelated reasons, the Department’s new producer compensation disclosure regulation has been strongly opposed by several New York insurance industry trade groups as either not going far enough to protect consumers or going too far in creating undue burdens on insurance producers.
Proponents of the new agreement between regulators and the Big Three are satisfied that the former Spitzer era settlements, which created an unfair playing field between those who could accept contingent commissions and those who could not, have been rolled back. Detractors of the new agreement are displeased that the 2005 settlements did not result in a further reduction of the use of contingent commission, which they allege cause a conflict of interest between how insurance producers are compensated and the interests of insurance consumers.
