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> Court Should Rescind Producer Comp Disclosure Rule, Argues IIABNY
(Jan. 10, 2012) — IIABNY’s appeal seeking to overturn the regulation mandating producer compensation disclosure is now in the hands of a panel of five State Supreme Court justices. The justices heard IIABNY’s attorney argue today in New York Supreme Court Appellate Division, Third Department that Regulation 194 exceeds regulators’ authority and is not based on facts and the law.
Speaking before Acting Presiding Justice Thomas E. Mercure and four other justices of the court, James C. Keidel of Keidel, Weldon & Cunningham, LLP argued:
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New York law does not give the state Financial Services Department authority to require compensation disclosure.
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The department did not comply with a state law that requires government agencies to provide estimates of what the regulations they propose will cost.
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There is no evidence proving a need for the regulation.
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It will not solve the alleged problem.
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The rule’s scope is too broad.
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It will impact least the few bad actors that are its targets.
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It could actually make unethical conduct more likely.
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The terms the department used in the regulation are so vague that producers cannot reasonably tell what is prohibited.
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The regulation changes the duties and obligations that exist under the law for New York insurance agents and brokers.
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The vague language allows for arbitrary or discriminatory enforcement.
IIABNY (which in 2004 called on insurance agents and brokers to voluntarily disclose to their clients the existence and nature of all their compensation) and the Council of Insurance Brokers of Greater New York have opposed required disclosures as a burden for producers and of little benefit to consumers. The associations filed an appeal Sept. 1 in an effort to overturn a trial court decision in November 2010 upholding Regulation 194. Last year, IIABNY’s attorneys argued in State Supreme Court that the New York State Insurance Department (now the Department of Financial Services) lacked the authority to impose the regulation’s disclosure rules and also that the regulation changes the legal duties and obligations for New York insurance agents and brokers.
IIABNY and CIBGNY hope for a decision on their appeal before the court’s summer recess.
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View a video message on today’s proceeding from attorney James Keidel, his partner, attorney Chris Weldon, and IIABNY Chair of the Board Chris Brassard, CIC.
Please note that IIABNY has also developed a comprehensive library of compliance resources for members to use while the legal challenge proceeds.
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> IIABNY Will Reply to AG's Opposition to Regulation 194 Appeal
(Nov. 10, 2011) — IIABNY and its attorneys are reviewing the state Attorney General Office’s opposition brief served in connection with the appeal the association and Council of Insurance Brokers of Greater New York filed more than two months ago challenging Regulation 194. The law firm of Keidel, Weldon & Cunningham, LLP, which represents IIABNY and CIBGNY, is currently preparing a reply brief that will respond to the arguments made by the state. The reply brief will be served on Nov. 21. Oral argument of the appeal is scheduled for Jan. 10, 2012 before the Appellate Division Third Department in Albany.
IIABNY and CIBGNY are seeking to overturn the burdensome and unnecessary regulation that forces New York’s insurance producers to disclose certain compensation information to their customers. The two groups filed the appeal Sept. 1 in an effort to overturn a trial court decision in November 2010 upholding Regulation 194. Last year, IIABNY’s attorneys argued in State Supreme Court that the New York State Insurance Department (now the Department of Financial Services) lacked the authority to impose the regulation’s disclosure rules and also that the regulation changes the legal duties and obligations for New York insurance agents and brokers.
"While our legal challenge to Regulation 194 has been waged over many months," said IIABNY President and CEO Dick Poppa, "we want to assure our members that we remain undeterred in representing their best interests in this case. There should be no doubt that we intend to do everything we can through the judicial system to secure a favorable outcome."
A copy of the state’s 46-page brief is posted on the IIABNY website. To follow progress on IIABNY’s efforts to fight the producer compensation disclosure regulation, go to the Lawsuit page on the association’s website.
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IIABNY Files Appeal in Reg 194 Case
(Sept. 1, 2011) — IIABNY and the Council of Insurance Brokers of Greater New York today filed a formal appeal of a trial court ruling that upheld a controversial state regulation. Attorneys from the law firm of Keidel, Weldon & Cunningham, LLP submitted a brief on the trade groups’ behalf with the New York State Supreme Court Appellate Division, Third Department in Albany.
“We still believe that the Insurance Department exceeded its authority by issuing this burdensome, unnecessary regulation,” said IIABNY Chair of the Board Christopher A. Brassard. “Regulation 194 places unprecedented obligations on law-abiding insurance producers, and it provides no additional benefit to consumers. We fully expect to prevail after the appellate court hears our arguments.”
Regulation 194 requires agents and brokers to tell clients how insurance companies pay them, whether the clients have asked or not. Should a client have questions about the producer’s compensation, the producer must provide, in addition to that information, many other details about the policy sold and policies the client rejected.
IIABNY, which in 2004 called on insurance agents and brokers to voluntarily disclose to their clients the existence and nature of all their compensation, has opposed mandated disclosures as burdensome for producers and of little benefit to consumers. IIABNY and CIBGNY, the only producer trade groups to launch a legal challenge to the regulation, argued that New York State insurance law does not give the Insurance Department the power to make these demands. They also said that the regulation is arbitrary and imposes large, needless compliance costs on producers. However, the trial court upheld the regulation in November 2010, and the groups filed a notice of appeal with the Third Department the next month, preserving their right to formally appeal. After months of gathering new information to strengthen the case, the IIABNY board of directors voted last May to file the appeal.
State law permits the Insurance Department time to file a response with the court. IIABNY said that it expects the court will schedule oral arguments for sometime in the fall.
View a video message from IIABNY President and CEO Dick Poppa.
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> NY Agents, Brokers Should be Complying with Producer Compensation Disclosure Requirements
(July 7, 2011) — IIABNY is reminding all insurance producers that they should be complying with New York State’s producer compensation disclosure rules. The association cited a letter from regulators implying that they would step up enforcement after June 2011.
IIABNY President and Chief Executive Officer Richard A. Poppa, CAE, AAI, said, "IIABNY still believes this is a burdensome and unnecessary requirement, and we are continuing to fight it in court. Right now, however, it has the force of law. All insurance agents and brokers who need a New York license for a particular sale must comply."
Poppa noted that the New York Insurance Department said in a Nov. 5, 2010 circular letter to producers and insurance companies that, for the first six months, it would focus enforcement efforts on "willful or egregious" violations of the rule or on acts that demonstrate a pattern or practice of wrongdoing. "Now that those six months are up," he said, "all New York producers must assume that the department will enforce this regulation in much the same way it does any other. No one should believe that they can ignore the regulation without consequences."
IIABNY has model disclosure notices on its website (www.iiabny.org) for all insurance producers to use. New York Insurance Regulation 194, which took effect Jan. 1, requires agents and brokers to tell clients how insurance companies pay them, whether the clients have asked or not. Should a client have questions about the producer’s compensation, the producer must provide, in addition to that information, many other details about the policy sold and policies the client rejected.
IIABNY and the Council of Insurance Brokers of Greater New York, the only producer trade groups to launch a legal challenge to the regulation, argued that New York State insurance law does not give the Insurance Department the power to make these demands. They also said that the regulation is arbitrary and imposes large, needless compliance costs on producers. A trial court ruled against the two organizations last fall; IIABNY has announced plans to file an appeal within the next few weeks.
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> NYSID Rolls Out FAQ Page on Producer Compensation Disclosure
(April 11, 2011) — The New York Insurance Department has published for the first time a list of answers to frequently asked questions about Insurance Regulation 194. The regulation, which took effect Jan. 1 and which IIABNY has fought in court, requires producers to disclose to their clients certain unrequested information about their compensation. The department posted the list on its Web site April 11.
While the list provides little new information, the department did clarify:
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That captive agents are bound by the requirements
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That a carrier may provide the initial mandatory disclosure on the producer’s behalf with the application and other disclosures required by law
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That a producer cannot satisfy the requirements merely by posting the mandatory initial disclosure prominently in his office
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That a producer must make the mandatory initial disclosure even when he is not receiving compensation for a policy
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That the regulation does not apply to title insurance
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That a producer of a group health policy does not have to give the mandatory initial disclosure to individual certificate holders unless he has direct sales contact with them.
For more information about Regulation 194 compliance, visit the Compliance page in the Regulation 194 section of the IIABNY Web site.
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NYSID Nixes Web-Based Producer Compensation Disclosure
(Mar. 3, 2011) — The New York Insurance Department has told IIABNY that a proposed shortcut for producer compensation disclosure does not meet the requirements of Regulation 194. An IIABNY member had asked whether it would be permissible to post the text of the mandatory initial disclosure on the agency's Web site and send the page's link to the client by e-mail. IIABNY presented the question on behalf of the member to the department; in an email, a department attorney rejected the idea.
The attorney objected on two grounds:
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There is no guarantee that the purchaser will click on the link and visit the Web site; and
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Even if the purchaser does click the link and visit the site, there is no guarantee that she will do so at or prior to the time of application for the policy, as the regulation requires.
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New York High Court Limits Producers' Fiduciary Duties to Clients
(Feb. 17, 2011) — IIABNY today applauded a decision by the state’s highest court affirming well-established law about insurance producers’ obligations to their clients. The New York Court of Appeals ruled that common law does not require an insurance broker to disclose to its clients incentive arrangements it has with insurance companies.
New York Gov. Andrew M. Cuomo (while he was the state’s attorney general) took legal action against Wells Fargo Insurance Services, Inc., alleging that the firm breached its fiduciary duties to its clients by entering into incentive agreements with insurance companies and not disclosing those arrangements to the clients. The action alleged that Wells Fargo steered clients to the companies with which it had incentive arrangements. After both trial and appellate courts disagreed, the state took the case to the Court of Appeals, which affirmed the lower courts’ decisions today.
Writing for the court, Judge Robert S. Smith noted “the complexity of an insurance broker’s role,” and cited prior decisions holding that the law does not require brokers to disclose to their clients contractual relationships they have with insurance companies. “We agree that such disclosure is not normally required,” he wrote, “and if there are exceptions to that rule, this case does not present one.”
IIABNY had been concerned that the court might weaken its previous decision in the case of Murphy v. Kuhn. The Murphy decision affirmed that, absent a special relationship, insurance producers’ only legal obligation is to obtain the coverage the client requests within a reasonable time or inform the client of the inability to do so.
The court's decision applies to common law only and does not affect New York Insurance Regulation 194, which requires producers to make unrequested disclosures to their clients about their compensation. Regulation 194 remains in force. IIABNY and the Council of Insurance Brokers of Greater New York are considering filing an appeal of last November's trial court decision upholding the regulation.
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NYSID Approves IIABNY Producer Comp Disclosure Forms
(Dec. 17, 2010) — The New York State Insurance Department issued an opinion letter on Dec. 16 stating that the sample forms IIABNY created to help agents and brokers comply with Regulation 194 meet the regulation's requirements. IIABNY has been working with Insurance Department counsel on the forms for several months; as a result, there are some minor editorial changes to the forms the association distributed during the 15 live compliance meetings and four webinars it has held since July. All of the revised (and NYSID-approved) forms are available for download in either Microsoft Word or fillable PDF format from the IIABNY Web site.
“These model disclosure notices are part of IIABNY’s inclusive approach to both fighting this regulation and preparing members to comply with it,” said IIABNY Chair of the Board David M. Gelia. “We will be better able to guide our members now that the Insurance Department has agreed that our model language meets the regulation’s requirements.”
The model disclosure notices are the products of extensive work and collaboration between the association and Insurance Department officials. They are part of a two-pronged approach IIABNY has taken to both fighting and preparing for Regulation 194. While the association has combated the requirements in court, it perceived that they might still take effect. A state Supreme Court judge on Nov. 19 rejected arguments IIABNY and the Council of Insurance Brokers of Greater New York made in a legal action to stop the regulation. Both groups are considering whether to appeal that decision.
IIABNY will continue to report developments regarding Regulation 194 on the Situation Room page and in the IIABNY Insider.
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Membership Votes Overwhelmingly in Support of Appeal
(Dec. 3, 2010) — The results are in. By a wide margin IIABNY’s member agents and brokers say they want the association to pursue further legal action to reverse a court decision upholding the New York regulation that mandates insurance producers disclose their compensation to clients. More than 86 percent of the 195 respondents answered "Yes" when asked on IIABNY’s recent online opinion poll if they believe an appeal of the court’s decision would be in the best interest of agents and brokers. Slightly more than 13 percent answered "No."
The poll results were among the factors IIABNY’s board of directors reviewed Thursday when it met via conference call to discuss filing an appeal to prevent Regulation 194 from remaining on the books after it goes into effect Jan. 1, 2010. The directors, who also considered expected legal costs and the likelihood an appeal would succeed, concluded they needed additional information before reaching a final determination.
IIABNY will be reaching out to the Council of Insurance Brokers of Greater New York, its partners in the Regulation 194 legal challenge, to discuss how the organizations will proceed. We will keep you informed while the board of directors continues its deliberations.
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IIABNY, CIBGNY Dispute Court's Ruling on Producer
Comp Disclosure Regulation
(Nov. 19, 2010) — IIABNY and the Council of Insurance Brokers of Greater New York today expressed disappointment with a state trial court ruling that upheld the regulation requiring insurance producers to disclose their compensation.
“We respectfully disagree with Justice Platkin’s ruling today,” said IIABNY Chair of the Board David M. Gelia. “We continue to believe that this regulation is an impermissible attempt to rewrite the insurance law and an unfair imposition of large costs on law-abiding insurance agents and brokers.”
IIABNY and CIBGNY argued that New York State Insurance Law does not give the Insurance Department authority to mandate compensation disclosure. They also asserted that the regulation is arbitrary and imposes massive and unwarranted costs of compliance on insurance producers. However, Acting Supreme Court Justice Richard M. Platkin’s opinion disagreed on both counts, ruling that the department does have the authority and that the regulation is not unfairly burdensome.
“We have a mandate from our members to fight this unfair regulation,” Gelia added. “It is what they need us to do, and it is the right thing to do.” Gelia said that the groups’ volunteer leaders will hold discussions shortly to determine their next steps.
IIABNY’s comprehensive approach to compensation transparency allowed the association to simultaneously challenge the burdensome regulation while preparing agents for its possible implementation if the final court decision is not reached before the Jan. 1, 2011 effective date
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IIABNY is 'Underwhelmed' by Changes to NYSID Circular Letter on Producer Comp Disclosure
(Nov. 8, 2010) — IIABNY said today that the final draft of the state Insurance Department’s circular letter providing guidance on a controversial new regulation left key questions unanswered. The association’s Chair of the Board called changes made to the guidelines for complying with Regulation 194, Producer Compensation Transparency, "underwhelming." The circular letter, according to David M. Gelia, left a number of important points unclear, including:
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How and under what circumstances the regulation will apply to producers who are residents of other states
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A precise definition of the types of compensation subject to and exempt from the disclosure requirements
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The precise timing of the required initial disclosure
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Whether the department considers producer ownership of any individual shares of a company to constitute an ownership interest and the criteria for determining whether that interest is material
"The end product shows," Gelia said, "that the department truly does not understand how complex the task it is requiring agents and brokers to perform really is. We will continue to press the department for definitive answers to the questions we sent them last summer."
The circular letter did clarify a small number of relatively minor points, such as the disclosure requirements for life insurance and other types of policies that last several years but that pay most producer compensation in the early years. It also stated that a producer may use an insurance company provided estimate of his compensation when a prior history of profit sharing is not available or easily calculated.
The circular letter states that a producer may respond orally to a client’s request for additional information about his compensation; the relevant provisions in the regulation (parts 30.3(b) and (c)) do not say this.
Gelia also noted that Insurance Department circular letters have a history of evolving. IIABNY’s research has found that one-third of the circulars issued in the past 10 years have been modified or withdrawn.
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NYSID Issues Circular Letter on Producer Compensation Disclosure Regulation
(Nov. 5, 2010) — The New York Insurance Department has issued a circular letter providing guidance to insurance producers on how to comply with Regulation 194, which requires producers to disclose to their clients certain information about how insurance companies compensate them. The circular had been expected since late summer, when the department circulated a draft for comment. IIABNY was among the groups that sent comments and questions to the department about the draft.
IIABNY leaders and staff plan to review the circular letter and provide an analysis for members shortly.
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IIABNY, CIBGNY Tell Judge Regulators Lack Power to Impose Compensation Disclosure
(Oct. 15, 2010) — Attorneys for IIABNY and the Council of Insurance Brokers of Greater New York argued this morning in State Supreme Court in Albany that the New York State Insurance Department does not have the authority to mandate insurance producers disclose their compensation to insureds. Attorney Richard G. Liskov of Chadbourne & Parke, LLP presented IIABNY and CIBGNY’s case in an hour-long hearing before Acting Supreme Court Justice Richard M. Platkin at the Albany County Courthouse. Co-counsel James C. Keidel of Keidel, Weldon & Cunningham, LLP provided counsel and guidance during the presentation.
(Watch videos of Jim Keidel and IIABNY President & CEO Dick Poppa commenting after the hearing.)
Regulation 194, Producer Compensation Transparency, requires producers to disclose certain information about their compensation to all clients, regardless of whether the clients have asked for it. Should any client request more information, the regulation requires the producer to provide detailed information about his compensation for the policy sold and the compensation he would have received had the client chosen a different policy.
The two attorneys argued that:
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The Insurance Department does not have authority under New York law to mandate compensation disclosure;
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The regulation "represents an impermissible attempt to rewrite the Insurance Law on a subject as to which the Legislature has already specifically legislated";
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Parts of the regulation "impose massive and unwarranted costs of compliance on brokers so as to constitute an arbitrary exercise of regulatory power"; and
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The regulation violates producers’ rights to due process and equal protection under the U.S. and New York State Constitutions.
IIABNY and CIBGNY hope for a resolution to the dispute before Jan. 1, 2011, which is when Regulation 194 is to take effect. To learn more about the Regulation 194 legal challenge, including viewing related legal documents and biographies of key figures in the case, go to the "Lawsuit" page posted on IIABNY’s Web site.
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Rebuttal Filed Today by IIABNY, CIBGNY Refutes NYSID 'Mischaracterization'
(August 19, 2010) — IIABNY and the Council of Insurance Brokers of Greater New York today filed rebuttals to the New York attorney general’s memorandum and Insurance Department’s affidavit opposing the groups’ legal challenge to Regulation 194. The two insurance producer trade organizations sent the response to the attorney general today and will file it in New York State Supreme Court in Albany tomorrow.
The rebuttal came in response to the attorney general’s July 28 filing, which in turn was a response to the action, known as an Article 78 proceeding, that the two groups initiated last spring. The responses and affidavits filed today came from IIABNY, CIBGNY, former IIABNY Chair of the Board Neal L. Sullivan of Sullivan Financial Group in Mahopac and agent George D. Yates of Dayton, Ritz & Osborne in East Hampton. Among other things, the affidavits contended:
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that the Insurance Department’s response "mischaracterized" the groups’ positions and actions during the development of Regulation 194;
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that the department failed to support claims that insurance producers will incur little additional cost from complying with the regulation; and
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that the court precedents the department cited do not support its arguments that the New York Insurance Law authorizes the regulation or that the regulation’s requirements are reasonable.
Regulation 194 requires producers to disclose certain information about their compensation to all clients, regardless of whether the clients have asked for it. Should any client request more information, the regulation requires the producer to provide detailed information about his compensation for the policy sold and the compensation he would have received had the client chosen a different policy.
"I believe that (New York Insurance) Superintendent (James) Wrynn and (Insurance Department) Attorney (Matthew) Gaul are well-meaning public servants with a high degree of integrity," IIABNY President and CEO Richard A. Poppa stated in his affidavit, "but, as to particular statements made by Mr. Gaul, we do believe that he has unfortunately mischaracterized IIABNY’s position with respect to the Regulation." Refuting the contention that IIABNY had supported the regulation in the past, Poppa added, "IIABNY has consistently opposed the Regulation, and the fact that IIABNY provided suggestions to the Superintendent at the Department’s request and in an effort to potentially avoid litigation concerning the Regulation in no way undercuts the force of IIABNY’s opposition."
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IIABNY Will File Rebuttal to AG’s Response to Legal Challenge
July 30, 2010) — IIABNY, the Council of Insurance Brokers of Greater New York and their attorneys are reviewing the state Attorney General Office’s response to their legal challenge to Regulation 194. The regulation, if implemented at the beginning of 2011, would force New York’s insurance producers to disclose certain compensation information to their customers. The response, filed in New York State Supreme Court this week, includes an affidavit, answer to the petition with exhibits and memorandum of law.
IIABNY and CIBGNY strongly oppose the regulation and will submit a formal rebuttal to the court by Aug. 19. "In all of our petitions, affidavits and legal briefs, IIABNY and CIBGNY have vigorously contended that this regulation was issued completely without the required statutory authority, and that certain of its provisions are arbitrary, unreasonable and unconstitutional," said IIABNY President and CEO Richard A. Poppa. "We remain steadfast in our opposition, and we look forward to presenting our response to the state’s arguments."
IIABNY (which in 2004 called on insurance agents and brokers to voluntarily disclose to their clients the existence and nature of all their compensation) and CIBGNY have opposed mandated disclosures as burdensome for producers and of little benefit to consumers. IIABNY and CIBGNY were part of an industry effort throughout 2009 aimed at convincing the New York Insurance Department to drop Regulation 194 or minimize its burdens on producers. After the department adopted the final version of the rule last winter, IIABNY and CIBGNY filed a legal action in May to block its implementation.
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IIABNY Files Legal Action Today in State Supreme Court
(May 25, 2010) — The months-long preparations on a legal challenge to the state regulation requiring producers to disclose their compensation to clients ended today when attorneys for IIABNY and the Council of Insurance Brokers of Greater New York jointly filed papers in New York State Supreme Court. The attorneys, who filed the papers in the court's Third Judicial District in Albany, seek to initiate an Article 78 proceeding against the state Insurance Department. IIABNY President and CEO Richard A. Poppa, CAE, AAI, in coinciding with the filing that disputes the department's authority to enforce Regulation 194, addressed the association's membership in a video in which he details why the legal action proved necessary and what lies ahead. To learn more, visit IIABNY's Producer Comp Resource Page.
The IIABNY proposal gives insurance producers clear direction on how to comply with the regulation, should it take effect. (Read more)
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IIABNY Submits Proposal To NYSID as Part of Comprehensive Approach to Tackling Producer Compensation Disclosure
(May 14, 2010) — IIABNY announced today that it has given the New York Insurance Department proposed wording for a document to help insurance producers comply with the new regulation on producer compensation transparency. The not-for-profit trade association said that it submitted the proposal to the department on May 13. During conversations with IIABNY staff, department officials encouraged the group to submit its ideas.
New York Insurance Regulation 194, which the Insurance Department adopted earlier this year, requires insurance producers to disclose to their clients certain information about how insurance companies compensate them. The regulation is due to take effect next January 1.
The IIABNY proposal gives insurance producers clear direction on how to comply with the regulation, should it take effect. (Read more)
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CEO Video Message Updates Members on Approach to Producer Compensation Disclosure Regulation
(March 25, 2010) — In this latest update on New York's producer compensation disclosure regulation provided by IIABNY President and CEO, he breaks down the facts of the regulation and the association's comprehensive approach that it is pursuing to prevent this regulation from being implemented. The IIABNY effort includes a highly publicized legal challenge of the insurance department’s authority to promulgate the regulation, but it also includes behind-the-scenes work on compliance issues and continued engagement with the department to discuss potential implementation, putting IIABNY in a very strong position to serve the best interests of agents and brokers on all fronts. View the Message
You can find out more about our comprehensive approach by visiting the main Advocacy page of the IIABNY Web site and clicking the red "Producer Comp Updates" icon.
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IIABNY Board Moves Ahead with Legal Action to Stop
Producer Compensation Disclosure Regulation
(Feb. 10, 2010) — IIABNY's board of directors, after months of negotiation and more than three hours of deliberation at its meeting in Albany earlier this week, has decided that the association will proceed with legal action to stop a state Insurance Department regulation from taking effect. The final version of the regulation, published in the Feb. 10 edition of the New York State Register (see pages 10-14), requires insurance producers to disclose to their clients certain information about how insurance companies and others compensate them. It will take effect on Jan. 1, 2011.
The final regulation is a revision to a proposal that the Insurance Department published on Dec. 2. IIABNY said at that time that it was considering legal action to block it. The association obtained an advance copy of the final version last week. While IIABNY was successful in securing some positive changes, the board concluded that the regulation would still place an undue burden on its members for no justifiable reason. IIABNY is also challenging the Insurance Department’s authority to promulgate the regulation.
In announcing the association’s intention to fight to block the rule, IIABNY president and CEO Dick Poppa said: “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. 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.”
The announcement comes after months of negotiations between IIABNY and the Insurance Department to make the final rule less onerous for producers. The association has taken the legal steps to commence the action.
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Producer Compensation Disclosure Rule Finalized;
IIABNY Board to Discuss in Albany
(Feb. 5, 2010) — IIABNY has received the New York Insurance Department's final version of its regulation to require disclosure to consumers of producer compensation. The department intends to publish the final rule in the Feb. 10 edition of the New York State Register. As a result of negotiations between IIABNY and the Insurance Department in January, the final version includes some important revisions that IIABNY had suggested, but has also left other areas of concern.
The version that the department published in the New York State Register on Dec. 2, 2009 required a producer to disclose to the purchaser whether he was representing the insurance company or the purchaser in a particular transaction. IIABNY objected to this as confusing to the purchaser and forcing producers to make legal distinctions that they are not qualified to make. The new version requires only that the producer provide a description of his role in the sale.
The new version also drops the requirement that producers provide initial compensation disclosures on all policy renewals, another requirement IIABNY asked the department to take out.
However, the rule did not make changes the group sought in the definition of compensation that a producer must disclose and in the required timing of disclosure notification, among a number of other needed changes.
The IIABNY board of directors is holding a special meeting with Insurance Department officials in Albany on Feb. 9. The rule will be effective January 1, 2011. A decision on IIABNY’s formal response to the new developments will likely follow the discussion with the department.
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IIABNY Meets Again with NYSID on Disclosure Reg
(Dec. 11, 2009) — IIABNY representatives met today with the New York Insurance Department to discuss the proposed rule on disclosure of producer compensation. Chair of the Board Lane Rubin, President and CEO Richard Poppa, and counsel James Keidel of the law firm of Keidel, Weldon & Cunningham met with department officials at their office in Albany.
The gathering followed IIABNY's Dec. 2 announcement that it is prepared to take legal action to stop the department from enforcing the rule. Discussion centered on the association's specific concerns about the rule. While neither side made any promises about future actions, the meeting was cordial and productive. IIABNY still intends to submit written comments about the rule to department, in accordance to state regulatory law.
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A Member Update on Producer Compensation Disclosure
(Dec. 8, 2009) — A proposed regulation that would require insurance producers to disclose information about their compensation was published Dec. 2 in the New York State Register. The publication in the Register began a 45-day public comment period prior to final implementation, which could be anywhere from four to six months according to the state Insurance Department. After the comment period, the Insurance Department has the option to promulgate the regulation as is, change or withdraw it. The regulation is unacceptable in its current form, and IIABNY intends to continue its fight against its implementation.
Since the first draft was introduced by the Insurance Department in February, IIABNY has steadfastly maintained such a regulation is unnecessary and that there is no consumer demand for this type of disclosure. IIABNY took a three-pronged approach to the initial draft and three subsequent revisions by: working diligently with the Insurance Department to try to bring the regulation into an acceptable form for producers and consumers; communicating with legislators to keep them up to date and aware of our concerns; and exploring our options for possible legal action.
Despite months of negotiations with the Insurance Department, the proposed regulation published last week in the Register is still unacceptable, so IIABNY has taken the necessary steps to commence a legal action to challenge the rule should it be adopted. There are four major areas of concern:
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Role disclosure – The published version of the regulation requires producers to disclose “whether the producer represents the purchaser or the insurer for purposes of the sale”. This requirement has been over-simplified and is not a “black & white” answer, particularly for independent agents. IIABNY feels that it will be difficult, if not impossible, for producers to comply. In many situations, producers act as agent AND broker simultaneously, depending on the coverage requested. It would also be confusing for purchasers. Finally, while independent agents may by statute be representatives of the insurers, they must act in the best interest of the customer at all times to maintain the relationship.
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Timing of the notice – The published version of the regulation requires disclosure “not later than application for the insurance contract or renewal.” This provision is too vague and does not take into consideration the practical application to an agent’s day-to-day operations. When is “application” made? Does it occur with the first phone inquiry or a signed application?
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Applicability to renewals – The published version of the regulation requires the same disclosure for renewals as for newly written policies. IIABNY feels that this provision is cumbersome and adds no real value for the consumer while adding additional expense for producers. IIABNY has consistently supported voluntary disclosure when asked by the customer and feels that voluntary disclosure is the correct approach for renewal policies.
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Definition of compensation – The definition of “compensation” that must be disclosed is overly broad and it would be difficult for producers to comply with the regulation because of the negligible difference a single policy might have on the contractual incentives between an insurer and its producers. Many of the items listed are dependent on a number of factors not known until the end of a calendar year. While it is our understanding that the Insurance Department did not intend to include miscellaneous items of an advertising or promotional nature, the published version of the regulation defines “compensation” as “anything of value including money, credits, loans, interest on premium, forgiveness of principal or interest, vacations, prizes or gifts”. (Items having an aggregate value of less than $100 per year per insurer are excluded.)
IIABNY has been and continues to work with all segments of the insurance industry to oppose this regulation. Our bottom line is to protect the interests of IIABNY members and their customers. Our members have made it clear that they want IIABNY to take any necessary action to fight this unnecessary and burdensome proposal.
Details about the proposed regulation can be found online on IIABNY’s Producer Comp Resource Page.
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Insurance Dept. Releases New Version of Producer Comp Disclosure Regulation
(Oct. 21, 2009) — The New York Insurance Department today released a new version of its proposed requirement for insurance producers to disclose information to clients about their compensation. This is the fourth version the department has produced since last January.
Labeled as Regulation 194, the new version differs from the third version (released in September) in two respects:
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The prior version would require producers to disclose, upon the insured’s request, information about compensation they expect to receive in connection with quotes obtained. The new version requires disclosure of anticipated compensation only in connection with those quotes actually presented.
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The prior version gave insureds three years after policy issuance to request information about producer compensation; it gave the producer 30 days to respond. The new version shortens the insured’s timeframe for requesting this information to 30 days after policy issuance, but the producer would have only five business days to respond.
The department has not yet published the proposed rule in the New York State Register. Once that happens, the public will have 45 days to comment on it before the department can formally adopt it. IIABNY is continuing to review the department’s proposals and is working with both the department and the governor’s office to ensure that any regulation is fair to independent agents and brokers and presents as light a burden as possible.
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IIABNY Updates Members on Status of Producer
Compensation Disclosure
(Oct. 15, 2009) — Producer compensation disclosure continues to be IIABNY’s top advocacy priority. Work continues behind the scenes as the state Insurance Department reviews recommendations from IIABNY and other organizations on the third draft of the proposed regulation.
While we have been successful in achieving changes favorable for producers to the first two drafts, we still have significant concerns with certain aspects of the yet-unpublished third draft. In particular, we strongly object to the draft’s role disclosure provision because of the unique function independent agents serve in helping their customers and working with insurance companies. We are currently researching our options in the event the final draft regulation is unacceptable to us because it unfairly discriminates against independent agents and brokers.
Once the final draft version is posted by the Insurance Department in the New York State Register, as required by the State Administrative Procedure Act, there will be a 45-day public comment period. After publication in the Register and receipt of public comment, the Insurance Department may adopt, revise or withdraw the proposal. If adopted, the Insurance Department must file the full text of the rule with the Department of State. At the same time, a “Notice of Adoption” is published in the Register.
If the final rule will be substantially different from the proposed rule, the department would be required to file a “Notice of Revised Rulemaking” and accept public comment for at least another 30 days. IIABNY’s Executive Committee and staff will meet Oct. 27 with state Superintendent of Insurance Jim Wrynn, and producer compensation disclosure will be at the top of the agenda. Details about the proposed regulation can be found online on IIABNY’s Producer Comp Resource Page.
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IIABNY Tells Governor's Staff of 'Significant Concerns' With Producer Compensation Disclosure Reg
(Sept. 10, 2009) — IIABNY representatives told Paterson administration officials today that they have significant concerns with a proposed rule that would require insurance producers to disclose to their clients information about their compensation. The Albany meeting with members of Gov. David A. Paterson's staff came as the New York Insurance Department has begun the formal process for issuing the rule.
Mark J. Hagan, president of Perry & Carroll, Inc. in Elmira and past chair of the board of IIABNY, was joined by IIABNY Senior Vice-President for Industry Relations and Education Kathy Weinheimer and legislative representatives Michael Barrett and Jill Muratori. The hour-long meeting, which centered around an as yet unpublished third version of the regulation, was described as "positive" and a "good discussion." It was one of a series of meetings about the rule the governor's staff is holding with insurance industry groups this week and next.
While IIABNY, working with other industry groups and the Insurance Department, has been able to make meaningful changes to improve the rule, we still have significant concerns about certain aspects of it. We expect to follow up with the governor's staff and others as the process of readying the rule for publication unfolds. Based on the meeting today, we expect the department to post a copy of the latest version on its Web site shortly.
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NYSID Issues New Draft of Compensation Disclosure Reg
(July 9, 2009) — The New York Insurance Department yesterday released a long-awaited new draft of rules that would require insurance producers to disclose to their clients how they get paid. The new draft, which IIABNY received yesterday afternoon and which is available for review on the department's Web site, would require producers to disclose certain information in writing prior to binding coverage. Oral disclosures would be permitted in cases where time does not allow for preparation of a written disclosure.
If the insured requests, the producer would have to disclose descriptions of the nature, amount and source of compensation; details of alternative quotes, including coverage, premium and the compensation the producer would have received; descriptions of any material ownership interest of the producer in the insurer and vice versa; and an explanation that the law prohibits producers from reducing their commission to reduce the premium.
IIABNY staff and directors are reviewing the draft this morning. Our initial review indicates that we have some concerns, as the draft does not reflect many of the changes we suggested. We will provide a response to the department shortly.
Editor's Note: After you review the draft, let us know how this would impact your agency by e-mailing us, or if you're on LinkedIn or Twitter, post a comment on the IIABNY LinkedIn Group or to the IIABNY Twitter page.
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Poppa Provides Producer Comp Disclosure Update in Video
(March 23, 2009) — There's been plenty of developments since IIABNY President and CEO Richard A. Poppa, CAE, AAI, addressed the association's membership several weeks ago via an online video regarding the approach the organization would take in dealing with the state Insurance Department's draft regulation of producer compensation disclosure. Poppa returns with another video message explaining IIABNY's actions in the interim and future prospects.
Click here to view Poppa's message.
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IIABNY Proposal for Producer Compensation Disclosure
(March 13, 2009) — As we have been reporting to you, IIABNY has been actively involved in discussions directly with the Insurance Department and other industry groups since the introduction on February 4 of the Department's draft proposal for the regulation of producer compensation disclosure. IIABNY, as well as the industry in general, had significant concerns with the original draft and its impact on the agent and broker community. IIABNY has made it clear to the Department that in its current form the initial draft is unacceptable.
While IIABNY has made it clear to the Department now and over the past several years that it does not believe that a disclosure rule is necessary the association has received clear indications from its meeting and discussions with Department officials that the New York State Insurance Department intends to create a mandatory disclosure rule. Rather than sit on the sidelines as the department issues potentially burdensome rules, the association has taken the position that it is better for producers to have a strong voice in the discussions that mold them.
At the Insurance Department's request, IIABNY submitted its recommendations for a more reasonable and workable regulation, keeping in mind the following principles established by IIABNY's board of directors:
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IIABNY opposes any burdensome requirements that will add cost to the insurance transaction and will fight to protect the rights of agents and brokers to minimize burdensome requirements.
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Any requirements that are proposed should be applied consistently to all distribution channels
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Compensation disclosure should occur when it fits best into each individual agent or broker's approach to prospective and current clients
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New York should not single itself out by creating any requirements that are unique to New York
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IIABNY has consistently supported voluntary disclosure of compensation when requested by the client.
IIABNY's proposal was submitted to the Insurance Department this week and a side-by-side comparison of the Insurance Department's draft and IIABNY's proposal is now available.
Questions or concerns can be directed to Dick Poppa or Kathy Weinheimer.
IIABNY hopes that the department will incorporate its ideas in the final version but has not ruled out alternative courses of action if that version is detrimental to producers.
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IIABNY Asked for Alternatives to
Insurance Dept. Compensation Proposal
(Feb. 26, 2009) — Richard A. Poppa, IIABNY president & CEO, informed the association's members today in an e-mail message that the state Insurance Department has asked the organization to submit redraft language for a proposed regulation on disclosing producer compensation. In the message, which is posted online, Poppa explains IIABNY's position and the rationale behind it.
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IIABNY, Insurance Department Discuss Producer Compensation Disclosure Proposal
(Feb. 19, 2009) — A meeting described by IIABNY Chair Neal L. Sullivan as "open and positive" tackled the New York State Insurance Department’s recent broker compensation proposal today. Sullivan and Kermit Brooks, first deputy superintendent, NYSID, led their respective teams during discussions aimed at conveying IIABNY’s concerns about the controversial draft regulation.
“We appreciate the Insurance Department’s willingness to listen to our concerns and suggestions, and the open atmosphere of the discussion.” said Sullivan. “We will be providing additional information requested by the Insurance Department and will continue our dialogue with them on this matter.” Brooks indicated that a working group representing industry stakeholders will begin its review of the proposal next month.
Although the Insurance Department’s draft does not restrict profit sharing or other compensation, IIABNY and others are particularly concerned with the broad definition of compensation and the form and method of disclosure.
IIABNY is also working with a broad range of industry groups on this issue. Recent meetings have been held with the Professional Insurance Agents of New York State, Inc., New York Insurance Association, Inc., Association for Advanced Life Underwriting, American Counsel of Life Insurers, American Insurance Association, Council of Insurance Brokers of Greater New York, National Association of Health Underwriters, National Association of Insurance and Financial Advisors, NAIFA-New York State, and the National Association of Independent Life Brokerage Agencies.
Posted Feb. 25, 2009
IIABNY will participate in two upcoming working group meetings scheduled by the state Insurance Department. The meetings, which will cover property and casualty issues related to the department's draft regulation on producer compensation disclosure, are scheduled March 5 and March 10. In addition to property and casualty, the March 10 meeting will cover health insurance issues. The department has also scheduled working group meetings March 4 and March 9. They will address life insurance issues.
IIABNY is also participating in an industry-wide meeting with other trade, producer and company groups scheduled Feb. 26 in Albany. The meeting's focus will be on the industry's general response to the Insurance Department draft regulation.
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NYSID Releases Proposed Compensation Disclosure
Regulation to IIABNY
(Feb. 4, 2009) — The state Insurance Department has released its initial draft of a proposed regulation on producer compensation disclosure to IIABNY and other interested parties for comment. IIABNY has been actively discussing this issue with senior staff at the Insurance Department; however the association has some major concerns with the proposal. IIABNY has consistently supported voluntary disclosure when requested by the client and opposes any additional burdensome requirements on agents and brokers. Last summer, the association’s representatives asserted IIABNY’s position at departmental hearings.
IIABNY will continue negotiations with the Insurance Department and will be represented on a working group set up specifically to deal with this issue. IIABNY will also be working with other producer and company associations. The draft regulation deals only with compensation disclosure and does not prohibit compensation or contingency arrangements between producers and their insurance companies.
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NY Insurance Dept. to Hold Hearings on Producer Comp
(June 30, 2008) — The New York Insurance Department and the New York Attorney General’s office have announced that it will conduct hearings in July on permissible forms of producer compensation and requirements for disclosing them. The hearings, which will take place in Buffalo, Albany and New York, will seek, “the views of interested persons about the proposed addition of a new regulation to the Insurance Department’s regulations…regarding permissible forms of insurance producer compensation and disclosure by insurance producers of all forms of compensation.”
The announcement follows several years of controversy surrounding the issue of so-called contingent commissions received by insurance producers. Former Attorney General and later Governor Eliot Spitzer investigated the practices of several large brokers and insurance companies in 2004, culminating in October of that year with a high-profile lawsuit against mega-broker Marsh, Inc. Similar suits against other large brokers and insurers followed. All but one of the defendants (Liberty Mutual being the exception) settled the charges out of court in exchange for monetary penalties and promises to limit or eliminate their payments of contingent commissions.
According to a copy of the hearing announcement obtained by IIABNY, “The Superintendent and the Attorney General seek the views of interested parties on whether insurance producers in this State should be required to make full disclosure to the insured, and obtain its consent, in writing of any compensation from an insurer or other entity relating to the issuance, renewal or servicing of the insured’s insurance policy or annuity contract. The Superintendent and the Attorney General also seek views about contingent commissions, and whether such compensation creates an irreconcilable conflict of interest for producers.” The notice further states that the regulators will seek information as to what extent various forms of commission and profit sharing are leading to business steering or other deceptive and anti-competitive practices.
The hearings will occur in Buffalo on July 14, Albany on July 23, and New York on July 25. IIABNY intends to provide written and oral testimony at one of the three hearings and to have representatives in attendance at each. Its testimony will reflect IIABNY’s long-standing position that profit sharing is a legitimate method of compensation that should remain legal, and that any disclosure requirements should not be unduly and unnecessarily burdensome to producers.
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Settles Producer Compensation Lawsuit, Implements ‘Supplemental’ Commission
(July 24, 2007) — The attorneys general of Connecticut, Illinois and New York announced yesterday a settlement with The Hartford over allegations of illegal market timing of investment products, bid rigging and illegal steering of property-casualty business. At the same time, the insurer announced that it would begin to implement a new “supplemental commission” program for the year 2008. The insurer’s chairman and CEO Ramani Ayer said in a statement, “We value our strong partnerships with independent agents and brokers. Our new property-casualty supplemental commission program reflects their feedback for a more predictable compensation package.”
Travelers announced a similar program earlier this year.
The settlement requires The Hartford to stop paying contingent commission on several lines of business, including homeowners, private passenger auto, boiler and machinery, and financial guaranty. These lines fall under the so-called “65 percent rule,” which the attorneys general established in prior settlements with insurers such as Travelers, Chubb and Zurich. Under this rule, affected companies promise to stop paying contingencies on any lines of business where the attorneys general have concluded that insurers who do not pay contingencies write 65 percent or more of the premium volume. The agreement sets a deadline of Oct. 1, 2007 for The Hartford to stop paying contingencies on these lines.
An executive for The Hartford confirmed to IIABNY that the insurer’s new supplemental compensation program would go into effect Jan. 1, 2008, and existing contingency agreements would be honored until the end of 2007.
The agreement also requires The Hartford to inform policyholders of a toll-free phone number and Web site where they can obtain information about its producer compensation practices.
The IIABA general counsel is preparing a detailed analysis of The Hartford’s agreement and its impact on agents and brokers. IIABNY will post a link to the analysis on its Web site when it becomes available. IIABNY members may also find it helpful to review the compensation disclosure kit for members, created in December 2004 and amended this past April. The kit includes the policy statement adopted by the IIABNY board of directors, a code of consumer rights and responsibilities, and suggested templates for discussing this issue with clients. For complete information on the producer compensation issue, visit the Research section of the Web site. Member login is required to access this section.
Related link
IIABNY Rejects RIMS Statement, Supports Profit-Sharing for Producers
(May 31, 2007) — IIABNY Chair of the Board Stephen R. Zogby today reaffirmed the association’s support for profit-sharing for insurance producers. He made his remarks in response to a recent statement from the Risk and Insurance Management Society that called these compensation plans “an inherent conflict of interest.”
“IIABNY strongly supports profit-sharing agreements between insurance companies and their agents and brokers,” Zogby said. “We feel that profit-sharing gives producers powerful incentives to work with their clients to control losses. Over the long term, those clients benefit from lower premiums as insurance companies compete for their business. We couldn’t disagree more with the position taken by RIMS.
“IIABNY also has long supported voluntary disclosure by producers to their clients of the types of compensation they receive,” he added. “The vast majority of insurance buyers understand that agents and brokers get paid by the companies and deserve fair compensation. We believe that giving clients the information they want about compensation improves the overall relationship. It is disappointing that RIMS finds this insufficient. We hope and expect that insurers will continue to appropriately reward good performance by their producers.”
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Liberty Mutual to Acquire Ohio Casualty
(May 7, 2007) — Liberty Mutual Group announced today that it is purchasing Ohio Casualty in a transaction valued at $2.7 billion. Ohio Casualty, following the acquisition that is expected to close in the third quarter of 2007, will be part of Liberty Mutual Group’s Agency Markets business unit. Liberty Mutual's regional companies and Ohio Casualty support the Trusted Choice national brand as company partners.
Among the unresolved issues IIABNY is monitoring in the interim is the fate of Liberty's producer incentive compensation program. The insurer is defending itself in court against charges it used contingent commissions to induce brokers and independent agents to illegally steer business to Liberty. Lawsuits have been filed by the attorneys general offices of New York, Connecticut and Illinois over the alleged practice.
The 11 companies in Liberty Mutual Agency Markets have more than 6,800 employees and about 6,500 appointed agencies. In 2006, Liberty Mutual Agency Markets’ net written premium was $5.9 billion. Ohio Casualty, which has about 2,100 employees and operations in 48 states, has approximately 3,400 appointed agencies. In 2006, Ohio Casualty's net premium was $1.4 billion.
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Chubb Settles Customer Steering Charges;
Agrees to End Contingent Commissions
(December 21, 2006) — The office of New York Attorney General Eliot Spitzer announced today that it has reached a settlement with The Chubb Corp. to resolve an investigation of alleged customer steering, improper use of finite reinsurance, and other unlawful industry practices. The attorneys general of Connecticut and Illinois joined in the settlement. Chubb agreed to pay $15 million in restitution to policyholders and $2 million for the cost of the investigation. Most important to independent agents and brokers, however, is Chubb’s agreement to end the payment of contingent commissions for all of its insurance products on Jan. 1, 2007.
Chubb is the latest insurer to agree to restrictions on contingents, following Zurich and St. Paul Travelers, among others. By ending contingent commissions for all lines of business, however, the Chubb deal goes much farther than the earlier agreements. The prior deals prohibited the payments on specific lines of business, usually excess casualty, and gave the attorneys general the ability to order payments to desist on lines of business where 65 percent of the market is controlled by insurers who do not pay them. Chubb’s agreement simply abolishes contingent commissions for all lines.
IIABNY members should anticipate future announcements involving other insurers and prepare for changes in the way insurers compensate them. Travelers announced such a change in November after the attorneys general found that the 65 percent thresholdhad been reached on several lines. IIABA and IIABNY continue to work with the insurance companies to ensure that new compensation systems will be fair and equitable for agents and brokers.
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Zurich Releases Class Action Settlement Notice
(December 19, 2006) — Zurich Insurance has mailed a Notice of Proposed Class Action Settlement to policyholders who may be entitled to participate in the settlement. This notice relates to the settlement between Zurich and several state attorneys general last spring over charges of alleged bid rigging and steering. The settlement closed investigations into the company's compensation of brokers.
To assist IIABNY members who receive inquiries from insureds about what they should do regarding participation in the proposed settlement, IIABA's Office of the General Counsel prepared an executive summary on what the notice means and how it affects policyholders.
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Caution is Urged in Agent Discussions Over Company Actions
(December 12, 2006) — Agents and brokers should remember that they must be "extraordinarily cautious" in discussing individual company actions with and among their fellow producers. Primarily for their own protection, all members should review as soon as possible a condensed set of carrier/vendor feedback guidelines prepared by the IIABA General Counsel's office. It is important that IIABNY members read and adhere to the 10 items listed in the guidelines. If you have any questions, feel free to contact us.
Additionally, IIABNY implements an anti-trust compliance program that applies to all officers, directors, employees and committee or task force members of the association and its subsidiary organizations.
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4 Carriers Must End Contingency Commission Jan 1, AG says
(November 30, 2006) — New York Attorney General Eliot Spitzer announced Nov. 30 that, under agreements reached over the last year, four insurance companies can no longer pay “contingent commissions” to agents and brokers for personal auto, homeowners, boiler & machinery and financial guarantee insurance. The decision, effective Jan. 1 and is levied against the four insurers – AIG, St. Paul Travelers, Zurich and ACE, Ltd. – involves the controversial 65 percent rule. Under the terms of the settlement signed earlier this year, the four carriers have agreed not to pay contingent compensation in any line of insurance in which 65 percent of all other carriers do not pay it– including direct writers and captive carriers. Previously barred were contingent commissions for excess liability insurance. Connecticut and Illinois Attorneys General Richard Blumenthal and Lisa Madigan, respectively, are also part of this agreement.
IIABNY firmly believes that contingent commissions, in the form of profit-sharing, are a legitimate method of compensation for agents and brokers when transparency and full disclosure is available to the consumer. IIABNY will meet with Spitzer and his staff, Attorney General-elect Andrew M. Cuomo and key legislators regarding this issue and the importance of contingent commissions to IIABNY members and the industry. IIABNY has held private discussions with Spitzer and his staff, as well as meetings with the carriers involved at the time the agreements were signed. IIABNY stressed concerns that the agreements could eventually lead to elimination of profit-sharing. IIABNY will meet with Spitzer’s office, Attorney General-elect Andrew M. Cuomo and key legislators about this issue and the importance of contingent commissions to our members.
We urge the four carriers to challenge the determination by the Attorneys General, and we will continue a dialogue with the insurers on the issue of compensation. IIABNY believes this rigid interpretation of contingent commissions is at odds with sound business practices. The consequences will have an adverse affect on independent agents, and not on the large mega-brokers, whose involvement in steering and bid rigging was the original problem.
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Big 'I' Joins Legal Fight Over Proposed Zurich Settlement
(September 25, 2006) — IIABA has filed an amicus curiae brief in opposition to part of a proposed class settlement with Zurich in the United States District Court for the District of New Jersey. The Big “I” points out in the brief that it opposes the portion of the proposed settlement that would require independent insurance agents and brokers to provide insureds a form describing the company’s practices in compensating agents and brokers. The national association also opposes the bar on Zurich’s payment of incentive compensation to agents and brokers in the future if 65 percent of the insurance companies in the marketplace do not pay incentive compensation for a product, line or segment of business.
Read the entire Big "I" amicus brief online.
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Contingent Payment Restrictions Loosen for 3
(September 8, 2006) — Aon Corp. is the latest major insurance brokerage to be allowed by New York Attorney General Eliot Spitzer and his counterparts in Illinois and Connecticut to accept contingent commissions when the firms serve as a managing general agent or underwriting manager. The amendment to an agreement Aon reached in March 2005 with the three attorneys general and state insurance regulators is similar to recent changes in settlements involving Marsh Inc. and Willis Group Holdings.
In an new release issued Aug. 7, Aon president and CEO Greg Case said, “This amendment correctly recognizes that when we act as an agent for the insurer, it is appropriate for us to accept contingent compensation from the insurer. We believe that the amendment will give Aon more flexibility to structure its relationship with insurers to the mutual benefit of Aon, insurers and the ultimate insureds.”
The amendment to the agreement, which applies when Aon acts on behalf of a single insurer or program and accepts business from brokers, exempts certain business units of the Chicago-based firm from restrictions relating to compensation, contingent commissions and mandated disclosures.
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