Agent associations in New York are responding with mixed reactions to Governor Eliot Spitzer's plan to increase the cost of penalties for certain insurance violations.
The increases, outlined in Gov. Spitzer's proposed Executive Budget, include a jump from $5,000 to $10,000 for “acting as an insurance producer or consultant without a license,” an increase that the Independent Insurance Agents and Brokers of New York (IIABNY) found particularly distressing.
IIABNY spokesman Bruce Barry said the association opposes all of the increases across the board, but the fine increase related to licensing was particularly striking because, in some cases, producers neglect to renew their licenses out of error rather than a willful attempt to defraud the public.
He added that former Governor George Pataki tried to impose similar fee increases, but they were never implemented.
“Our biggest concern is that these are some pretty hefty fines, and for some of our members who may accidentally just not renew their licenses, it could literally put some of them out of business,” said Mr. Barry.
He noted the complexity of licensing in New York State, explaining that there are multiple licenses with different renewal dates, and sometimes simple confusion is the reason why a license may not be renewed.
“Right now the department is going in the direction of basing [license renewals] on birthdays,” Mr. Barry said, but that plan, designed to simplify the license renewal process, will not be fully implemented for a few years.
Ellen Kiehl, executive director of the Professional Insurance Agents of New York (PIANY), offered a different perspective, indicating that the increase in fines for producers operating without a license might help in preventing unlicensed producers from conducting business, which PIANY would support.
Mr. Barry clarified, “Obviously, sadly, some people have every intention of defrauding the public, and if that's the case, they should be punished. But [IIABNY's] concern is for the ones who accidentally overlook dates, maybe just by a few days.”
Speaking to PIANY's view on the fine increases in general, Ms. Kiehl said the association is in the process of consulting with its members to gather feedback and determine whether the proposed increases will result in fines that are disproportionately high in relation to the violations.
One positive that Ms. Kiehl noted was that the fine increase for “violations of Insurance Law or regulation” makes a distinction between agents and brokers and insurers. The fine, currently at $500, would increase to $5,000 for insurers, but to just $2,500 for producers.
The previous, similar proposal by Mr. Pataki called for an identical increase for both insurers and producers.
A concern that Ms. Kiehl expressed with this same proposal, though, is whether an agent or insurer would be fined twice if the violation is determined to apply to both a regulation and the section of the Insurance Law on which the regulation is based.
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