Cuomo and regulators plan public hearings on insurance industry
Sessions to cover deceptive practices, commissions, fairness and other topics
State insurance regulators and Attorney General Andrew Cuomo are planning a series of joint public hearings — including one in Buffalo — to consider how insurance agents and brokers are paid in a bid to ensure fairness and prevent potential conflicts of interest.
The hearings, slated for July 14 in Buffalo, July 23 in Albany and July 25 in Manhattan, are intended to solicit input from various parties on a proposed new regulation governing compensation of agents and brokers, and how it is disclosed to clients.
The hearings will cover “contingent” and “supplemental” commissions, compensation disclosure, and deceptive or anti-competitive practices, among other topics.
“Those who sell insurance deserve to be fairly compensated and those who buy insurance deserve to be fairly treated,” said state Insurance Superintendent Eric Dinallo. “These hearings will help us understand how best to ensure the marketplace is competitive, transparent and fair to all.”
Independent insurance agents — those who sell more than one company’s products — generally earn both a flat percentage commission — based on premium volume and paid at the time of the sale — and a “contingent” commission. The second is paid later based on the overall profit, volume, retention, losses and business growth of an entire portfolio placed with a particular company.
Critics say such fees create a conflict of interest, and could lead agents or brokers to sell the client a policy that isn’t as beneficial but that pays a higher fee. But supporters say such conflicts also exist in regular and supplemental commissions, and argue that market competition will prevent conflicts.
The hearings and proposed regulation mark the latest volley by the state in its war on conflicts of interest, including in insurance.
A major probe in 2004 and 2005 by former New York Attorney General Eliot Spitzer found that the compensation practices at major brokerage firms and insurers had led to alleged bid rigging and price fixing for commercial insurance policies.
The three hearings are open to the public and will be Webcast live. The Buffalo hearing will be held at the Buffalo & Erie County Public Library at 1 Lafayette Square, at 10 a. m. on July 14. Additional information is available online at www.ins.state.ny.us . Those who wish to testify for up to five minutes should contact the Insurance Department’s Public Affairs Bureau at (212) 480-5262.
Those who wish to submit written comments to be included in the hearing record may submit them to Broker Compensation Hearings, Public Affairs Bureau, New York State Insurance Department, 25 Beaver Street, New York, NY 10004. Comments may also be e-mailed to PublicHearings Comments@ins.state.n y . u s , with the subject line “BROKER COMPENSATION HEARINGS.” Comments will be accepted for up to 15 business days after the hearing.
