The recent adoption of sweeping life insurance commission disclosure rules by the New York State Insurance Department has agents up in arms, not only in New York but across the country.
Often the trend-setter in the adoption of regulations designed to protect consumers, the New York Department’s new regulation is already drawing fire from the various trade associations representing life insurance agents.
Regulation 194, as it is known, requires agents to disclose that their compensation from the sale of a policy can vary depending on a number of factors and to inform the consumer that information about compensation is available both about the product being purchased and others that were considered during the sales process.
In a provision with certain big-time agents in mind, it also requires the disclosure of any material ownership interest that the agent has in the insurer issuing the policy.
This is a real break-through for consumers of life insurance. Both the adoption of the regulation and the vehement opposition and likely litigation coming from agent groups – and probably also life companies – will draw lots of attention.
All of it will help to alert consumers to the fact that there are unbiased sources of advice about life insurance and frequent opportunities to substantially reduce or even avoid commissions and thereby lower premiums or buy more protection and cash value for the same premium.
This may be the dawn of a new day for life insurance consumers. One can not only hope, but now perhaps believe it is so.
#1 by Bob Bland on June 10th, 2010
You state that this will be a boon for life insurance shoppers because they can know and thus avoid paying life insurance commissions. How so? Those commissions are built-in to every life policy and no agent in any state can rebate any portion of them to any consumer of life insurance buyer. So how can a consumer buy life insurance and pay no commission when such commission is part of the premium and no life agent sets prices or commissions?
#2 by David Barkhausen on June 10th, 2010
Some companies sell their policies without commissions. Otherwise, with many of the best permanent insurance policies, it is possible to structure components of the premium in a way that most all of the premium only carries a small percentage of the usual sales charge. Structuring a policy in this manner is not a rebate (though rebates are legal in certain states). The failure to disclose these alternatives is a glaring failure of current life insurance regulations.