NY REGULATION 194 TAKES EFFECT JAN 1

Please be advised that new disclosure requirements for New York producers become effective January 1, 2011. The New York State Insurance Department's Regulation 194, Producer Compensation Transparency, requires producers selling insurance in New York to inform a purchaser either orally or in prominent writing at or prior to the time of application for insurance of the following:

1. the role of the producer in the transaction;
2. whether the producer will receive compensation from the insurer or other third party;
3. that compensation may vary depending on a number of factors; and
4. the purchaser may request from the producer additional details regarding compensation.

If the producer provides this initial disclosure orally, the disclosure must also be provided in prominent writing to the purchaser prior to the issuance of the contract. The producer is required to maintain a copy of the written disclosure provided to the purchaser for at least three years. It should be noted that this disclosure requirement does not apply to an insurance producer that has no direct sales or solicitation contact with the purchaser, such as managing general agents or wholesale brokers.

The four point notice referenced above is called the 'mandatory initial disclosure'. Page two of this communication is a sample mandatory initial disclosure notice approved by the New York State Insurance Department which a producer may choose to use at time of application to be compliant with the mandatory initial disclosure requirement of Regulation 194. This mandatory initial disclosure will not be provided by William Penn in the application packet.

Please note that Regulation 194 and its accompanying Circular Letter No. 18 provide additional guidance to producers regarding what information needs to be provided if the purchaser requests additional compensation information. For your convenience Regulation 194 and Circular Letter No. 18 are attached. Please reference these documents when determining how you should respond to such inquiries.