Resident and nonresident agents licensed to do business in New York must begin disclosing to clients information about the compensation they receive from carriers. Regulation 194 is slated to take effect on January 1, 2011.
“Insurance producers all over the country have New York licenses,” says Lane S. Rubin, chairman of the Independent Insurance Agents & Brokers of New York. “They may have heard about the new requirements and incorrectly believed it’s a New York matter only. They don’t realize they also will have to comply with these rules if they write business in New York.”
Regulation 194 requires producers at or prior to the time of insurance application to disclose the following to the buyer:
- A description of the producer’s role in the sale.
- Whether the agent will receive compensation from the insurance company or a third party.
- That the buyer may request more detailed information about the producer’s compensation.
Should the buyer request more information, the producer must disclose:
- The nature, source and amount of the compensation.
- Descriptions of alternative insurance quotes and how much the agent would have received in compensation if the buyer had chosen one of them.
- A statement about whether the law permits the producers to change the amount of compensation he receives for a sale.
The regulation applies to agents required under New York law to hold a license to sell, solicit or negotiate insurance. This means it affects both New York residents and residents of other states who hold New York nonresident licenses.