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The final New York insurance producer disclosure regulation was published on February 10, 2010 and is to take effect January 1, 2011. Some Producer advocacy groups feel that the new law (11 NYCRR 30) includes requirements that they believe will decrease life insurance coverage, hurt sales and cost jobs without benefiting consumers. Greater clarification is needed to confirm whether there is any exception to the requirements for the sale of structured settlement annuities by licensed producers. But first let's take a look at the substantive portions of the new law:

§ 30.3 Disclosure of producer compensation, ownership interests and role in the insurance transaction.

(1) a description of the role of the insurance producer in the sale;

(2) whether the insurance producer will receive compensation from the selling insurer or other third party based in whole or in part on the insurance contract the producer sells;

(3) that the compensation paid to the insurance producer may vary depending on a number of factors,including (if applicable) 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 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, by requesting such information from the producer.

(b) If the purchaser requests more information about the producer?s compensation prior to the issuance of the insurance contract, the producer shall disclose the following information to the purchaser in a prominent writing at or prior to 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 presented 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 the sale of any such alternative coverage;
(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 based in whole or in part on the sale.

§ 30.4 Retention of disclosure.
The insurance producer shall retain a copy of any written disclosure provided to the purchaser pursuant to section 30.3 of this Part for not less than three years after the disclosure is given, unless the insurance producer has a written agreement with the insurer that the insurer shall retain such a copy .

§ 30.5 Exceptions.
This Part shall not apply:
(a) to the placement of reinsurance;
(b) to the placement of insurance with a captive insurance company pursuant to Article 70 of the Insurance Law;
(c) to an insurance producer that has no direct sales or solicitation contact with the purchaser, which may include wholesale brokers or managing general agents;
(d) to a sale of insurance by a person who is not required to be licensed as an insurance producer under Insurance Law section 2102(a)(1) for the purposes of that sale; or
(e) to renewals, except that if the purchaser requests more information about the producer?s compensation less than 30 days prior to a renewal or less than 30 days after a renewal, the insurance producer shall disclose to the purchaser in a prominent writing the information required by subsection 30.3(b) of this Part within five
business days.

An observation concerning possible exceptions and settlement industry stakeholders.

1. The exception for placement of reinsurance seems clear.
2. The exception, "to an insurance producer that has no direct sales or solicitation contact with the purchaser, which may include wholesale brokers or managing general agents" needs further clarification due to the peculiarities of a structured settlement transaction (explanation below).

The annuity purchaser in a structured settlement transaction is most often a qualified assignment company, to whom both the plaintiff settlement planner/broker and defense structured settlement broker have direct contact, yet the direct sales and solicitation contact of the product sold may be to other parties such as the plaintiff, the plaintiff lawyer, guardian ad litem, insurance adjuster or subscription insurance market leader.  Perhaps the National Structured Settlement Trade Association can deliver some "best practices" guidance to its membership.

Several structured settlement companies, including my firm, 4structures.com, LLC already provide a structured settlement affidavit or declaration that includes compensation disclosure, and have done so for years.

New York State Insurance Department announcement dated February 9, 2010

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