RIMS ‘Seriously Concerned’ on New York Producer Compensation Transparency Regulation Revisions
Jul 13, 2009
The Risk and Insurance Management Society (“RIMS”) has expressed serious concerns about the New York State Insurance Department’s most recent version of a proposed producer compensation regulation that was issued on July 8, 2009.
RIMS views the latest revisions to the original proposed regulation as a significant retreat from the regulation’s premise of protecting the rights of insurance consumers.
Hyperlinks to the revised and original draft of the Producer Compensation Transparency Regulation are provided below. Comments to the revised draft will be accepted until July 29, 2009.
A National Underwriter article detailing the matter is reprinted below.
National Underwriter Online News Service, July 10, 12:57 p.m. EDT
New York’s latest proposal for producer compensation disclosure regulations has drawn criticism from risk managers while insurance agents groups mostly support it.
The Risk and Insurance Management Society said, in a statement the regulation posted Wednesday on the New York Department of Insurance Web site (www.ins.state.ny.us), the proposal is viewed “as a significant retreat from the regulation’s premise of protecting the rights of insurance consumers.”
“RIMS has been actively involved in discussions among stakeholders and the New York State Insurance Department for many months,” said Deborah M. Luthi, member of RIMS board of directors and director of enterprise risk management services at Matheson.
She said her group had viewed the proposed regulation as originally proposed before it was modified “as a step in the right direction towards strengthening the trust relationship between the consumer and producer.
“While the regulatory process is advancing, RIMS is disappointed that the new document does not contain consumer protections that were part of the original proposal.”
The newly proposed regulation limits the amount of disclosure required before a policy is bound to who the producer represents in the deal, acknowledgement that the producer receives compensation from the selling insurer if they do, and that the amount of compensation varies between companies and contracts.
The proposed regulation lays out an extensive list of information buyers can receive about the details of compensation, including the amount of payment, but leaves it to the buyers to first ask for such information.
Gone is a notice that producers were to give buyers informing them about the nature of the compensation they receive from carriers.
The notice of disclosure is not required for renewals or wholesalers.
Reaction from producer groups to the latest draft was mixed.
Richard A. Poppa, president and chief executive officer of the Independent Insurance Agents & Brokers of New York, was critical of RIMS’ position.
“They continue to disappoint me in terms of understanding what the insurance public really wants in this regard. I think RIMS is in a different stratosphere on this issue. They are out to lunch on that,” he said
Of the changes made by the department, he said, “We are very pleased with the way this is being approached by the department and look forward to discussions with them on this draft. This is an improvement from the first draft, but we continue to noodle through it. We look forward to continuing our engagement [with the department] for the benefit of our members and the public. It has got to work for both sides.”
He added that the association is “delighted” with the efforts of the department to get ample input from the agent and broker community.
Matthew Guitbault, director of government affairs for the Professional Insurance Agents of New York said the association “appreciates the thoughtful modifications” the department made saying the original “inaccurately stated” the nature of producer compensation. Producers, he said, keep their best interests “at the forefront of their business plans.”
However, Mr. Guitbault said the association remains concerned about penalties for failure to disclose that make it an unfair trade practice under that state’s law that allows the superintendent of insurance to levy fines up to a total of $60,000.
He said the association will be meeting with Acting-Superintendent Kermitt Brooks later this month over the draft.
The department is accepting comments on the draft until July 29.
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