N.Y. regulation would increase transparency on insurance brokers’ pay

The New York State Insurance Department is proposing a rule requiring more transparency about how the sellers of insurance products are compensated.

The proposed regulation would require insurance producers to notify consumers of their right to request information on compensation that insurance carriers pay the producers for the sale or service of policies, the department said in a statement released yesterday.

If a consumer requests more information, the producer would need to disclose the amount and source of any compensation to be received from the sale, a description of any alternative quotes obtained by the producer and a description of any material ownership interest the producer has in the insurer.

If the amount of compensation is not known, the producer can provide “a reasonable estimate of the amount of value,” according to the proposed regulation.

There will be a 45-day public comment period before the rule is finalized. After the comment period, the rule could be changed or amended.

The Professional Insurance Agents of New York, though initially opposed to the regulation, has bowed to the inevitable.

“From the onset, PIA has held that additional regulation about compensation disclosure is unnecessary,” Diane Fowler, executive director of the agents’ group, said in a statement.

“When it became apparent that this regulation is inevitable, we worked closely with the Insurance Department to ensure that the final draft is both beneficial to consumers and feasible for agents. In this context, we are pleased that the information required to be disclosed in the final product is not dissimilar to what agents currently provide to their members.