By DAVID BERTOLA
dbertola@bizjournals.com | 716-541-1621

A new state law slated to go into effect Jan. 1 will require insurance brokers and agents throughout New York to disclose, to all clients, how much they are compensated.

And brokers and agents are none too happy about it.

"It's a solution looking for a problem," said Richard Poppa, president/CEO of Independent Insurance Agents and Brokers of New York, a not-for-profit trade association that disputed Regulation 194.

According to the New York State Insurance Department website, the law was designed to protect the interests of the public by establishing minimum disclosure requirements.

On Nov. 19, a state court ruled against the IIABNY and the Council of Insurance Brokers of Greater New York, trade groups that launched a legal challenge.

They argued the state insurance law does not give the Insurance Department the power to make these demands. They also said the regulation is arbitrary and imposes large, needless compliance costs on producers.

Acting Supreme Court Justice Richard Platkin disagreed on both counts.

"This regulation is unfair, unneeded and beyond the Insurance Department's authority," said Council of Insurance Brokers President Anthony Aquilino in a statement. "We regret that justice saw otherwise."

Poppa explained that Insurance Regulation 194 covers personal and commercial lines of insurance: property, casualty, life insurance, annuities and bonds.

He said his association may appeal the ruling.

"There's virtually no exception to the line or types of insurance this covers," he said.

The genesis for Regulation 194 dates to 2004, he said, when attorneys general and insurance departments of many states launched investigations of the country's largest brokers and found wrongdoings.

"As a result, they made the assumption that the type of misleading activities were prevalent among all brokers," Poppa said. "We are supportive of disclosure and believe if a customer asks what an agent is earning, a broker should tell them."

However, his organization's research determined a low percentage of customers ask for such information.

"Most agents told us they never have been asked for this, and around 15 percent say they have been asked around one to five times a year," Poppa said.

And while few customers seek this kind of data, he said agents that don't share it risk breaking trust with their clients and that the new regulations make it burdensome for brokers and agents.

"It now puts them in a position to respond with a detailed outline of their compensation and, in addition to the policy the client purchases, will have to outline the same information for any policy they presented to the client that was not chosen," he said.