Commission Disclosure Requirements for Producers
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Recently New York, Colorado and California have implemented or are implementing rules regarding commission disclosures.
New York’s commission disclosure law, Regulation 194, is effective 1/1/2011 and applies to producers selling or renewing an insurance contract. The producer must inform the client whether the producer represents the client or the insurer, that the producer will receive compensation for selling the insurance, that this compensation may vary based upon a number of factors, and that the client may request compensation information from the producer. The initial disclosure may be made either orally or in writing. If the client requests additional compensation information, the producer must give the client a prominent writing containing a detailed description of the compensation. The initial disclosure will be made by the home office, most often in the form of a disclaimer in the proposal language.
The text of the regulation: http://www.ins.state.ny.us/press/2009/NSReg194.pdf
In Colorado, per C.R.S.A. 10-16-133, an insurance producer who solicits or sells a policy on behalf of a carrier shall disclose to the person purchasing the plan that the producer will receive payment from the insurer. The producer must provide the client with the standard compensation schedule for the product being sold.
This is governed by Regulation 1-2-17: http://www.dora.state.co.us/Insurance/regs/F1-2-17_0309.pdf
California’s commission disclosure law, implemented by Assembly Bill 2589 and housed in Section 10604.5 of the California Insurance Code, is different from the disclosure obligations discussed above. First, the disclosure requirement is limited in scope to those situations where the client is a public entity. It also is unique in that the insurer is required to make the disclosure. Additionally, this disclosure doesn’t take place until after the sale of the policy. The insurer is responsible for annually disclosing the name and address of, and amount paid to, any individual that was paid fees or commissions in connection with the public agency's group health insurance policy. Ameritas handles this disclosure obligation though a process very similar to the Schedule A / Form 5500 process, with the disclosure being sent at the beginning of the group’s plan year. The statute can be found at: http://codes.lp.findlaw.com/cacode/INS/1/d2/2/7/s10604.5
Connecticut, Washington, Illinois, Oregon, Utah and Rhode Island also require commission disclosures, but the obligations are triggered only when the producer is paid by both the client and the insurer.