By TRACEY DRURY
tdrury@bizjournals.com | 716-541-1609

Insurance agents and brokers say a new state law requiring them to disclose how much they're earning on client policies hasn't had as much of a negative impact as expected - at least, not yet.

New York Insurance Regulation 194, which took effect Jan. 1, requires producers to tell clients that they will be paid commission and/or a bonus by insurance companies and exactly how much - whether or not the client requests the information. The law covers compensation information about the policy purchased, as well as for other options presented to the client.

The Independent Insurance Agents & Brokers Association of New York and the National Association of Professional Insurance Agents have been fighting the law since it was proposed. Last week, IIABNY said it intends to file an appeal this summer of a court ruling that upheld the regulation.

"It is a big deal," says John Schwab, president of Niagara National Inc. and regional director of IIABNY. "It does impose an added burden on all agents and brokers."

Of course, customers understand their agent or broker is making money off the policy, Schwab says, and if they're unhappy with how much they're paying, they know they can easily shop around.

"This is all competitive and market-driven, and if you're not happy with your agent or your policy, there are plenty of other places to shop around," he says. "No one is in business for free."

The state Insurance Department says the law's goal is transparency and protecting the interests of the public by establishing minimum-disclosure requirements.

Most insurance professionals so far have only had to deal with step one of the law, which requires verbal or written notice they are an agent of the insurance companies and will earn money from personal and commercial policies.

It's step two that could be especially burdensome, which comes into play if the client says yes and they would like to know how much the agency is earning, says David Gelia, executive vice president with United Insurance Agency and immediate past chairman of IIABNY.

"That step two can be incredibly burdensome, especially if that agent has done his job well and quoted you five or six policies," he says. "It's not explaining how much money they make, but every single nuance with each policy - even plans you didn't accept.

"What you might end up seeing is agents may quote less companies and it may end up hurting choice. It could be extremely time consuming and burdensome."

The region's three largest insurance agencies say the law is just an extension of policies they already had in place. First Niagara Risk Management Inc., the largest agency in Western New York with $590 million in premium volume, completed several Step Two disclosures since January. Elaine Stephenson, senior vice president of marketing, says the impact of Reg 194 has been minor.

"The initial one was a little time consuming. Step Two must include not only direct income/commission, but also any other compensation related to the sale of insurance," she says. "Each one has gotten easier to do."

Empire Financial Partners/John Hancock Financial Network modified its client welcome brochures and sales materials; while Lawley Services Inc., the No. 3 agency in town, implemented an automated process.

Lawley is averaging 250 primary disclosure statements monthly but has not yet had any requests for a secondary disclosure, says Fred Holender, director of strategic initiatives.

Smaller agencies say the regulation is simply unnecessary.

"Reg 194 is a solution in search of a problem," says Julius Aebly Jr., principal at The Walsh Group, a West Seneca agency with premium volume of $30 million. "It's unfortunate that the misguided actions of a few large national brokerage firms had to culminate in costly legislation that impacts an entire New York industry."

Ted Overdorf, president of Overdorf Associates Agency Inc., says the $4 million agency has always shared commission information with clients.

"It has, on occasion, been informative for them in that they assumed our commission was higher than it actually was," he says.