Here is a quick rundown of the
regulation:
Regulation 194 states that
unless the purchaser asks for additional information,
only the following information is required at or prior to
application for an insurance contract.
-
A description of the role the
producer. Example: I am an agent of the company.
-
Whether the producer will
receive compensation from the insurer or other third party.
-
That the producer's
compensation may vary depending upon a number of factors, and,
-
That the purchaser may obtain
additional information by requesting it from the producer
regarding compensation expected to be received by the producer
on the sale.
This is the only type of
information required to be provided unless further requested by the
purchaser.
The circular letter states that no
particular format is required for initial disclosure.
If the purchaser requests
additional disclosure, the compensation MUST be disclosed in writing
prior to the issuance of the insurance contract or within five
business days. Also, if the purchaser requests this disclosure
thirty days prior to or thirty days after a renewal, the disclosure
must also be made within five business days. A copy of the
disclosure given to the purchaser must be kept by the producer for a
minimum of three years.
The Circular Letter No. 18 adds
that the disclosure of the amount of compensation may be stated in a
number of different ways (for the purposes of this regulation the
definition of compensation is very broad including anything of
value, (money, credits, trips, prizes, gifts, etc., usually anything
over $100 in value):
-
A flat dollar amount.
-
A percentage of first year
premium, or,
-
A dollar amount or percentage
of premium, amortized using an expected duration of the contract
and indicating when most of the compensation will be paid.
EXAMPLE: "I expect to
receive from the Insurer 8% of the total premium paid on this policy
if you keep the policy in force for 13 years, which is the expected
duration for this type of policy. Most of the compensation will be
paid in the first year" would satisfy the requirement.
Click Here for the New
Part 30 of Regulation 194
Click Here for Compliance
Suggestions from NYS Dept. of Insurance.
Please Click Here for Additional Clarification from NAIFA and AALU.
Click Here for Detailed
Compliance Information (Powerpoint presentation)
Remember:
You must provide a Compensation Disclosure Notice to ALL New York
purchasers.
