Resident and non-resident 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,” said 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 a number of factors will affect the producer’s compensation, including the insurance company chosen and the volume and profitability of the agent’s business with that company.
• 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.
• Description of material ownership interests the producer has in the chosen insurance company, and vice versa.
• A statement about whether the law permits the producers to change the amount of compensation he receives for a sale.

The regulation will apply 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 non-resident licenses.

State-approved disclosure language is available here on the Professional Insurance Agents of New York web site. 

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