A dispute between New York
state regulators and the state’s largest insurance broking
organisations, the Independent Insurance Agents & Brokers of
New York (IIABNY) and the Council of Insurance Brokers of Greater
New York (CIBGNY), is heating up. This follows a court decision
against them which upheld Regulation 194, a new regulation
pertaining to detailed disclosure by brokers to their clients that
came into force on 1 January 2011.

Under the new regulation,
agents and brokers must tell clients how insurance companies pay
them, whether the clients have asked or not. Should a client have
questions about the producer’s compensation, the producer must
provide, in addition to that information, many other details about
the policy sold and policies the client rejected.

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This means a broker would
have to disclose, among other things:

  • Differences in types and
    amounts of cov erage;
  • Contrasts in policy terms;
    and
  • The pay he/she would have
    received had the client chosen a different policy.

In the first step in their
bid to have the latest regulation overturned, the two bodies have
joined forces to file a notice of appeal with the New York Supreme
Court Appellate Division.

“We will spend the next
several months building the strongest possible case we can make to
the appellate court,” said IIABNY board chairman David
Gelia.

The IIABNY and the CIBGNY,
the only producer trade groups to launch a legal challenge to the
regulation, argued in a Supreme Court hearing last year that New
York State insurance law does not give the insurance department the
power to make these demands.

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They also argued that the
regulation is arbitrary and imposes large, needless compliance
costs on producers.

On 19 November 2010, an
acting Supreme Court justice issued an opinion disagreeing with the
two groups on each count.

“We do not agree with the state Supreme Court’s ruling,”
Gelia said. “Regulation 194 is a costly demand on law-abiding
producers.”