The Independent Insurance Agents & Brokers of New York (IIABNY) and the Council of Insurance Brokers of Greater New York (CIBGNY) filed the action in New York State Supreme Court. The groups said the regulation is “burdensome and confusing,” according to a news release from the IIAB.
Insurance Regulation 194, which takes effect on January 1, 2011, requires producers to disclose compensation from insurance companies to their clients—not only commissions but also other compensation such as gifts. Furthermore, the client can request more detailed information, such as what compensation the broker would have received from an alternate insurance policy.
IIABNY and CIBGNY asserted that such a regulation is unnecessary and would not be in the best interests of either consumers or producers.
In their court action, known as an Article 78 proceeding, the groups are asking the court to annul all or parts of the regulation. Specifically, the groups said that the Insurance Department does not have authority under New York law to mandate compensation disclosure and that the regulation “represents an impermissible attempt to rewrite the Insurance Law on a subject as to which the Legislature has already specifically legislated.”
In addition to questioning the authority of the Insurance Department, the groups said parts of the regulation “impose massive and unwarranted costs of compliance on brokers so as to constitute an arbitrary exercise of regulatory power.” Furthermore, the groups said the regulation violates producers’ rights to due process and equal protection under the U.S. and New York State Constitutions.
IIABNY noted that the court proceedings might not conclude before the regulation’s scheduled effective date. In anticipation of that fact, the organization on May 13 sent the department a proposal for specific language that a producer could use for making required disclosure. Meanwhile, IIABNY and CIBGNY continue to pursue legal action.