N.Y. to Issue New Rules for Brokers’ Commission Disclosure

New York insurance brokers may soon be required to reveal much more about how they are being paid by insurers if the state insurance department follows through on plans to remake the rules on commission disclosure.

The subject of commissions has been a heated topic since at least the 2004 lawsuit against major brokers by then-Attorney General Eliot Spitzer, who challenged the established industry practice of taking so-called contingent commissions. Although settlements in those suits forced some brokers to stop taking contingent commissions, the rules for others have been murky ever since.

For now — previous settlements notwithstanding — New York insurance brokers have no legal requirement to disclose their commissions to clients. That ruling was reiterated in late December in a legal opinion by the state’s insurance department. But the decision included a warning that the state had plans to alter the rules on commission disclosure.

“We are reviewing the issues surrounding producer transparency, including considering regulations that would require all retail brokers to fully disclose compensation to insureds,” said Deputy Superintendent Steven Nachman.

It was not the first time the department has telegraphed those plans. Back in June, the department published a written notice of a rule change in the New York State Register, the first major step in remaking a regulatory procedure.

Through a spokesman, however, the department declined to speculate exactly when those new rules would be made public.