The Independent Insurance Agents & Brokers of New York has threatened legal action against the New York State Insurance Department over a proposed producer compensation rule the agency posted Wednesday.
The insurance superintendent “does not have legal authority to compel compensation disclosure,” according to a letter sent by IIABNY to the department after the rule was published in the New York State Register.
IIABNY also argued that there are “serious problems with the proposal’s extent.”
The National Association of Financial Advisors and the American Association of Life Underwriters both also joined in opposing the rule, known as regulation No. 194, Producer Compensation Transparency.
In a joint letter released today, NAIFA and AALU urged state Superintendent of Insurance James J. Wrynn to remove life insurance products, including annuities, long term care and disability insurance, from the reach of the proposed rule.
If the commissioner did impose a disclosure rule, it should only require that customers be notified that producers represent insurers in selling insurance and that they receive compensation based on sales, according to the letter.
“The proposed regulation emerged from past problems on bid-rigging and steering in the property-casualty arena, and no problems have been identified in the life insurance product marketplace,” the letter stated. In addition, the proposed regulation would provide no benefit to consumers but would decrease sales, decrease financial protection, increase unemployment, hurt the state economy, and increase the burden on state government programs, the groups argued.
The New York Department of Insurance, commenting on IIABNY’s threat to sue, claimed it was surprised that producers would complain about having to explain clearly whom they represent in a transaction.
“For years the Big I [IIABNY's national association] members have said they are the ‘trusted choice’ for consumers,” stated Matthew Gaul, special counsel to the New York department. “What they apparently don’t want to tell their customers is that in most transactions, they represent the insurance company.”