US risk managers applaud broker pay ruling

A US risk managers’ trade body has commended the New York Court of Appeals for upholding a ruling requiring brokers to disclose compensation sources.

“Consumers deserve the same transparency and information from their insurance brokers that is required of any other financial entity in order to make intelligent purchasing decisions,” said Daniel Kugler, external affairs committee board liaison for the Risk and Insurance Management Society (RIMS).

“RIMS strongly believes that these disclosures will eliminate the inherent conflict of interest posed by contingent fee arrangements, enhance the relationship between brokers and consumers, ultimately benefiting all risk practitioners by creating a more efficient and accurate insurance marketplace.”

In 2010, the New York State insurance department issued a ruling requiring producing brokers to disclose their role within the sale of insurance, compensation received as a result of the sale and all other factors that contribute to their compensation.

However, after the rule was issued, certain trade associations and insurance groups challenged the ruling, claiming the state’s insurance commissioner acted outside the scope of his authority. The New York Court of Appeals has now struck this challenge down.