The Risk and Insurance Management Society (RIMS) commends the New York State Insurance Department for issuing a proposed regulation requiring complete written disclosure of compensation arrangements in the insurance purchasing transaction.
While the proposal falls short of a flat-out prohibition of contingent fees for all insurance producers and maintains the two-tier system, RIMS views the regulation as a step forward in ensuring complete transparency in the process. Complete disclosure of compensation arrangements goes a long way towards promoting transparency and re-establishing trust between the broker and consumer, while also providing the consumer with sufficient information to evaluate potential conflicts of interest in the placement of insurance policies.
However, RIMS believes that this is only a first step toward complete transparency as contingency fees continue to present an inherent conflict of interest between the broker and the insurance purchaser. RIMS reaffirms its position that contingency fees should be broadly prohibited. The Society looks forward to working with the New York Insurance Department on the issue going forward.