January 10, 2011 - The New York State Insurance Department has adopted Regulation 194, which establishes disclosure requirements regarding compensation paid to insurance producers. A copy of the Regulation and related Circular Letter 18 is attached for your reference. The following procedures are required for compliance with the Regulation:
Step One Disclosure
An insurance producer selling an insurance contract must disclose the following information to the purchaser orally or in prominent writing at or prior to the time of application. If you provide the disclosure orally, you must also provide this information in prominent writing no later than the issuance of the insurance contract:
- A description of the role of the insurance producer in the sale;
- Whether the producer will receive compensation based in whole or in part on the insurance contract the producer sells.
- That the commission paid to the producer may vary depending on a number of factors, such as the insurance contract and insurer selected, or the volume of business or profitability of the contracts that the producer provides to the insurer; and
- That the purchaser may, upon request, obtain information about the compensation expected to be received by the producer based in whole or in part on the sale, and the compensation expected to be received based in whole or in part on any alternative quotes presented by the producer.
The attached Producer Compensation Disclosure Statement, Form No. 2518, is being provided to help you comply with the Step One Disclosure requirements.
Step Two Disclosure
If the purchaser requests more information about the producer’s compensation prior to or within 30 days after issuance of the contract, the producer must provide written disclosure of the information outlined in the Regulation. Oral disclosure is not permitted.
The information that will need to be disclosed upon request by the purchaser may include the average compensation the producer may expect to receive over the life of the contract. We are currently developing information, based on product line, which will help you generate the Step Two Disclosure if needed.
Please familiarize yourself with the Regulation and Circular Letter. The Regulation applies only to New York applications. It is your responsibility to comply. You are required to retain copies of the written disclosures provided to purchasers for three years after the date of disclosure. Do not submit copies of your written disclosures to Columbian.