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Remember when you were a kid there were always those few adults who would say that there were certain things that you should never ask of other adults? These were the same people who told you never to ask about their religion, political views, and how much money they make.

Well, I guess those same adults missed having that conversation with a certain group of kids, as those “kids” are now in Albany, NY, and are working for the New York State Insurance Department and have one heck of a News Year’s resolution for insurance agents in the Empire State. What’s their resolution? “Disclosure!”

As January 1, 2011 is quickly approaching, the producer communities (both independent and captive agents alike) are going to have to begin to comply with the new disclosure regulation that takes effect at precisely the same time that you are kissing your special sweetheart on the lips and wishing them “Happy New Year!” With the advent of the disclosure regulation, The New York State Insurance Department might as well be kissing producers on the lips at the same time, with what they are literally (and figuratively) doing to all of New York’s licensed agents or at least take them out to dinner first.

There has been a long and arduous battle in opposition to this mandate, as so many insurance industry organizations have fought the battle on a multitude of fronts. Battlefields have ranged from insurance tea parties, to the court system, to lobbying the legislature, and some have even stopped just shy of directing their members to “just say no” and simply not comply. Although there have been a number of worthwhile solutions suggested from different associations around the state, for purposes of this article we will talk about one organization’s successful attempt at assisting agents to understand, comply, and facilitate the implementation of this legal obligation within their agency. The Professional Insurance Association of New York has spent the last year (since the New York State Insurance Department released the regulation in January of 2010) working to find the best possible means to assist and educate agents so that they may at least cope with this latest of directives with the least amount of disruption to their business, while maintaining their privacy.

In addition, by remaining diligent in working closely with the department and constantly monitoring the changes that were occurring to this regulation almost daily, PIANY has now issued a release indicating how to comply with and at the same time not cause too much disruption to their business. This methodical process has proved to be extremely important because the regulation is very much different from what the Insurance Department first put forth when we last toasted the New Year.

For example, originally insurance producers would have been required to disclose every bit of their compensation, in vast detail, to all existing clients and prospects. However, let’s think back to what originally caused this debacle, the worst part that most agents feared was that they were also losing their contingent commissions, which in many cases is a large piece of an agency’s annual revenue and something that many agencies have grown to expect and depend on in order to maintain their business. Furthermore, there was discussion during testimony back in 2009 regarding the possibility of even repealing New York’s antirebating insurance laws. Just imagine for a second (anything more than that would cause you to have quite the New Year’s Day hangover) what a New Year’s Eve party it would be and what the playing field would look like if independent agents had to compete with the big direct writers who could offer any imaginable rebate for your clients’ business. What is even more of a resemblance of a tipsy reveler banging endlessly on an old pot at the stroke of midnight is that when the first draft of the regulation was first released the penalties that the department wanted to impose on brokers and agents for failing to comply, even with the best of intentions, were unbelievably horrible, as the original draft made failure to comply an “unfair business practice”, which when found guilty of in New York one may be subject to incredibly huge penalties.

Although no one wants or is excited about the regulation, rest assured that it is much less of a burden that it could have been. In lieu of the regulation in its original draft form, very simply put, it requires producers to give boilerplate information to new clients, and also to answer any questions posed to them if asked about how much money they make on the placement of a policy, which quite frankly is something that you would answer honestly anyway if asked.

Over this past summer, PIA of NY worked with the insurance department to have a circular letter issued to clarify some of the real problems that the regulation posed, and the association is seeking more information on yet many unanswered questions that they have identified with the assistance of their Agent Broker Compensation Disclosure (ABCD) task force, and other members they have spoken with around the state. This includes what is meant by the “time of application” when an application isn't used, and “when the policy is issued” if it is sent directly by a carrier. PIA has also asked the NYSID to formally approve wording that PIA developed, to be used in the secondary disclosure (also called “disclosure upon request”).

PIANY is continuing its work to help the agent and broker community by meeting with groups around the state to discuss the regulation, and by setting up a special website with all of the tools, including the flowchart and boilerplate language it has developed. It is also working with experts and producers to test an agency workflow process that lets agency management systems include the disclosure and recordkeeping requirements within the system. PIA also is offering a series of webinars to train agents and their employees about disclosure, focusing on helping the producer community to correctly and legally deal with the requirements of the regulation. For further assistance, PIANY members are encouraged to contact the PIA Industry Resource Center for answers to their individual questions and concerns. Well, this brings to an end another year in this thing of ours, and I hope that your memories of 2010 are pleasant ones. It certainly has been my pleasure and honor to come into your home or office and speak with you a couple of times a month through this column, and I look forward to some exciting conversations with you in the months to come.

From my family to yours, I wish you a very healthy, happy, and safe 2011 Happy New Year!