NY Drafting Transparency Legislation Requiring Brokers to Disclose Compensation to Clients
A New York insurance regulator at the Professional Wholesalers Association of NY State announced that proposed legislation is being drafting to require every retail broker in New York to disclose to their clients the value of all compensation deals with insurers.
The proposed “producer transparency rule” would “ban any New York broker from accepting any compensation from an insurer if not disclosed to the client beforehand,” said Steven Nachman, deputy superintendent for frauds and consumer services in the insurance department.
“Our goal is to bring disclosure regulations in line with agreements in effect with Marsh, Aon and the other major retail brokerages,” he added during a speech here before the Professional Insurance Wholesalers Association of New York State.
“If the amount of compensation cannot be determined up front,” he noted, such as with contingent deals based on the overall profitability of the total book of business an agency writes with a particular carrier, “the broker would have to provide an estimate and then disclose the actual amount within a reasonable time—say, within 10 business days of knowing the figure.”
Of particular interest to the PIWA members attending the meeting, Mr. Nachman said that the proposed regulation would only apply to brokers dealing directly with the public, meaning that it would effectively exempt wholesalers and managing general agents.
In talking with some retail agency officials in attendance, they noted that the insurance department has been considering such a regulation since early summer, and had spoken with some agent association leaders to sound them out about the concept and its implementation to lay the groundwork for the exposure draft.
Mr. Nachman said he didn’t expect the regulation to be released for public comment anytime soon, however.
“We’re talking months, not weeks,” before the draft is officially unveiled, he said.
Published on November 6, 2007
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