The New York insurance department will require agents and brokers to disclosure how much commission is being paid and by whom, if New Yorkers contemplating an insurance policy request the information, according to a statement released by the department.
The regulation will be published in the February 10, 2010 issue of the State Register, and its requirements will take effect as of January 1, 2011.
Insurance Superintendent James Wrynn said in a statement that the new regulation will provide transparency by initially providing information if requested and then following up with a more detailed statement if the consumer still wants more information. "Almost everyone buys insurance at some point, and in these difficult economic times, consumers should understand any incentives that may potentially affect the recommendations from their agents or brokers," he said in the statement.
The proposed regulation would require that when a consumer applies for an insurance policy, the agent or broker must explain to the consumer:
1. The agent or broker's role in the transaction;
2. Whether the agent or broker will receive compensation from the insurer based on the sale;
3. That the compensation insurers pay to agents or brokers may vary depending on the volume of business done with that insurer or its profitability; and
4. That the purchaser may obtain more information about the compensation the agent or broker expects to receive from the sale by requesting that information from the agent or broker.
If the consumer asks for more information from the agent or broker, he or she must be provided a more detailed written disclosure of the compensation expected to be received as well as a description of any alternatives presented by the agent or broker and the compensation associated with those alternatives.
Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, praised the Department of Insurance's perseverance in promulgating a rule in the face of stiff insurance industry opposition. He said, "We hope consumers will take advantage of the compensation disclosures to discourage agents and brokers from steering consumers into unfavorable products – steering based on the agent and broker compensation arrangement and not the best interests of the consumers. Disclosures only work if consumers get the information and act on it." Birnbaum added, "Promulgating a regulation is a start, but effective implementation and enforcement is essential. We will monitor the Department's efforts to protect consumers."
Tuesday, February 9, 2010
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