Maryland regulator set to consider compulsory broker pay disclosure; New York still mulling similar move one year after public hearings

SALLY ROBERTS



Maryland Insurance Commissioner Ralph S. Tyler last week said he is considering mandating producer compensation disclosure in the state and soon will invite interested parties to discuss the issue with him.

The move comes nearly one year after New York Insurance Superintendent Eric Dinallo and New York Attorney General Andrew Cuomo held three separate hearings on producer compensation issues, including disclosure requirements.

Six months later, Mr. Dinallo issued proposed regulations that would require all producers doing business in New York to provide written disclosure to clients of all compensation received in a transaction, including contingent commissions, credits, loans, vacations and gifts from insurers.

The proposed rules, which would not apply to reinsurance, captive and wholesale transactions, drew mixed reactions from the industry (BI, Feb. 9) and have yet to be formally published.

A spokesman for the New York State Insurance Department last week said the revised rules still are "in process.''

Mr. Tyler said Maryland's insurance department is not waiting to see what New York is going to do before tackling the issue, which he said has"not been closely examined'' by the department before.

He said it seemed "worth'' increasing the department's knowledge of producer compensation disclosure and to examine what, if any, changes make sense.

The department is collecting information about what other states have done or have considered doing and then"at some point in the not-too-distant future, I expect to invite people in to talk about it,'' he said.

He would not comment on what direction he might be leaning toward on the issue.

The department has not received any complaints from insurance purchasers about lack of disclosure, but Mr. Tyler said he doesn't view the lack of complaints as an indicator of whether there's a problem in the market.

It's our responsibility to be attentive to what's going on in the marketplace and to propose change when change is appropriate, irrespective of the existence or not of complaints,'' he said.



Agent and broker trade groups, which have been vocal on the issue in the past, said they don't know what is prompting Maryland to examine the issue now, but are more than willing to discuss their views with the state if invited.

We are not seeing any sort of national trend in regards to producer compensation disclosure,'' said Wes Bissett, Washington-based senior counsel of government affairs for the Independent Insurance Agents & Brokers Assn. With the exception of New York, the issue has been dormant for almost five years.

However, ``we are prepared and willing to sit down and meet with any commissioner or legislator who's interested in this issue and might be considering something along these lines and hope to educate them about some of the downsides associated with compensation disclosure mandates,'' Mr. Bissett said. IIABA favors a system where producer compensation is disclosed when requested by clients and is not mandated.

The Council of Insurance Agents and Brokers supports transparency, said Nicole Allen, the council's vp industry affairs."Our biggest concern about this is we're going to end up with a lack of uniformity among the states and it will be something completely different when you cross the state border.''

We'd much rather see something that's uniform,'' she said.

Mr. Tyler agrees that as a general proposition for this kind of thing, uniformity is a good thing. It's a value.'' But individual states may have to take a lead on the issue, he said.

You can't wait all the time until you can get agreement,'' he said. "Our responsibility is to regulate in a way that is protective of consumers in Maryland.''