The new rule requires brokers to tell clients how they are getting paid

The Independent Insurance Agents & Brokers of New York announced that it will proceed with legal action to stop a New York Insurance Department regulation on broker transparency from taking effect.

The final version of the regulation, published on February 10, requires insurance producers to disclose to their clients certain information about how insurance companies and others compensate them. It will take effect on January 1, 2011.

The final rule is a revision to a proposal that the Insurance Department published on December 2.

New York's oldest insurance producer trade association said at that time that it was considering legal action to block it.

“Our members have unanimously and vociferously told us that this rule is unnecessary, ineffective and overly burdensome to their businesses.

IIABNY president and CEO Dick Poppa

Having received an advance copy of the final rule, the IIABNY board of directors deliberated for three hours at its quarterly business meeting on February 8. While recognizing that the department made some positive changes, the board concluded that the rule would place an undue burden upon its members for no justifiable reason.

IIABNY is also challenging the Insurance Department’s authority to promulgate the regulation.

In announcing the association’s intention to fight to block the rule, IIABNY president and CEO Dick Poppa said, “IIABNY has a responsibility to represent and to protect the interests of its members, and our members have unanimously and vociferously told us that this rule is unnecessary, ineffective and overly burdensome to their businesses. We cannot sit back idly and let the department impose an unnecessary rule that will only serve to add another time-consuming and costly requirement for our members, which in turn could also result in additional costs to consumers.”

The announcement comes after months of negotiations between IIABNY and the Insurance Department to make the final rule less onerous for producers. The trade group expects to launch the formal legal action soon.

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