New York regulator backs down on compulsory disclosure
New York’s insurance regulator has made a u-turn on the disclosure of insurer payments to brokers after brokers said it would burden their operations, Bloomberg reports.
Brokers will not be required to immediately tell how much they expect to get from carriers unless asked by a client.
The largest brokers, Aon, Marsh & McLennan and Willis, previously agreed to ditch hidden fees.
Insurance buyers said New York’s revision weakens consumer protection.
A balance
“We’re trying to strike the balance to make this workable for the industry and at the same time making additional information available for consumers,” said Matt Gaul, special counsel to the state insurance department, in an interview today. “On the mom-and-pop agent level, they often don’t have all of the information on compensation at their fingertips.”
In 2004, broker commission prompted Eliot Spitzer, then New York’s attorney general, to open an investigation that was retired when Aon, Marsh & McLennan and Willis agreed to pay restitution and stop accepting secret fees.
Same rules for all
The large brokers then complained they had to operate under stricter rules that smaller firms.
“Part of this effort is an effort to level the playing field,” Gaul said. “The two-tiered system is not really appropriate from a regulatory perspective. We’re focused on bringing the rest of the broker community up to the level that Marsh, Aon and Willis are at.”
Buyers have serious concerns
The Risk and Insurance Management Society, which represents insurance buyers, said it has “serious concerns” about the new proposal.
The revisions are “a significant retreat from the regulation’s premise of protecting the rights of insurance consumers,” RIMS said in a statement. “RIMS is disappointed that the new document does not contain consumer protections that were part of the original proposal.”
Brokers welcome changes
The Independent Insurance Agents & Brokers of New York, which represents smaller brokers, welcomed the changes. “We really do appreciate how the insurance department has opened their doors to dialogue with various producer groups,” said Lane Rubin, chairman.
“In my career which spans over 30 years, I have never been asked, ‘By the way, what are you earning on this policy?’”
