Authors: William H. Byrnes & Benjamin S. Terner
Why is this Topic Important to Wealth Managers? Discusses new insurance disclosure laws in New York for those who sell life insurance.
Beginning tomorrow life insurance brokers in the Big Apple will be disclosing commissions to consumers. New York is one of the first states that are mandating life insurance commission details to be disclosed to clients.
Under New York Insurance law,  an insurance producer selling or renewing an insurance contract must disclose the following information to the purchaser orally or in writing not later than application for the insurance contract or the renewal:
(1) whether the insurance producer represents the purchaser or the insurer for purposes of the sale;
(2) that the insurance producer will receive compensation from the selling insurer based on the insurance contract the producer sells;
(3) that the compensation insurers pay to insurance producers may vary depending on a number of factors, including the insurance contract and the insurer that the purchaser selects, the volume of business the producer provides to the insurer or the profitability of the insurance contracts that the producer provides to the insurer; and
(4) that the purchaser may obtain information about the compensation expected to be received by the producer for the sale and for any alternative quotes obtained by the producer by requesting such information from the producer.
If a purchaser of a life insurance contract requests more information about the producer’s compensation prior to the issuance of the insurance contract, the producer is required to disclose the following information to the purchaser in a prominent writing no later than the issuance of the insurance contract, (except that if time is of the essence to issue the insurance contract, then within five business days):
(1) a description of the nature, amount and source of any compensation to be received by the producer or any parent, subsidiary or affiliate based in whole or in part on the sale;
(2) a description of any alternative quotes obtained by the producer, including the coverage, premium and compensation that the insurance producer or any parent, subsidiary or affiliate would have received based in whole or in part on any such alternative quotes;
(3) a description of any material ownership interest the insurance producer or any parent, subsidiary or affiliate has in the insurer issuing the insurance contract or any parent, subsidiary or affiliate;
(4) a description of any material ownership interest the insurer issuing the insurance contract or any parent, subsidiary or affiliates has in the insurance producer or any parent, subsidiary or affiliate; and
(5) a statement whether the insurance producer is prohibited by law from altering the amount of compensation received from the insurer for the sale.
If the purchaser requests more information about the producer’s compensation after issuance of the insurance contract but less than three years after issuance, the insurance producer shall disclose to the purchaser in a prominent writing the information as discussed in the above paragraph within thirty days.
If the nature, amount or value of any compensation to be disclosed by the insurance producer is not known at the time of the disclosure required by law, then the insurance producer shall include in the disclosure:
(1) a description of the circumstances that may determine the receipt and amount or value of such compensation, and
(2) a reasonable estimate of the amount or value, which may be stated as a range of amounts or values.
Further, if the disclosure required by law is provided orally, the insurance producer must also disclose the information required to the purchaser in a prominent writing no later than the issuance of the insurance contract.
Lastly, an insurance producer shall not make statements to a purchaser of a life insurance contract contradicting the disclosures required by the above described laws or any other misleading or knowingly inaccurate statements about the role of the insurance producer in the sale.
Next week’s blogticles will discuss new laws effective in 2011.
We invite your questions and comments by posting them below, or by calling the Panel of Experts.
 Part 30 to Title 11 of the Official Compilation of Codes, Rules, and Regulations of the State of
New York (Regulation No. 194).