(Dewitt, New York, Feb. 9, 2017 ) - A measure in Gov. Andrew Cuomo’s New York State budget proposal could put small insurance agencies out of business, an insurance producer’s trade group said today. The Independent Insurance Agents & Brokers of New York (IIABNY) criticized the proposal as “unwarranted.”
The governor’s proposed 2017-2018 budget includes provisions that would dramatically hike penalties against insurance producers (agents and brokers) who violate the state’s insurance law. Current law enacted in 2011 permits the New York State Department of Financial Services (DFS) to fine violators up to $1,000 per offense. Prior to that, the maximum fine was $500. The governor’s budget would allow DFS to assess fines up to the greater of:
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$10,000 per offense
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Double the aggregate damages attributable to the violation
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Double the aggregate economic gain the individual made from the violation
“This is a substantial and unwarranted increase in penalties,” said IIABNY Chair of the Board John H. (Jack) Smith, Jr., CPCU, ARM, CIC. “An agency that forgets to renew one of its four licenses may face a $10,000 fine for each policy it sells while the license is lapsed. A typical IIABNY member agency has seven employees and less than $1 million in annual revenues. Fines of this size could put a small agency out of business because of an oversight, negating the governor’s stated goal of making New York State pro-job creation. Acts like this tend to reduce jobs, not increase them, and that is not good for any New Yorker.”
The governor’s proposal would also give DFS the ability to sue the violator directly to recover the amount of the penalty. Currently, only the New York State attorney general may take such action.
“For many years,” Smith noted, “the DFS published advisory legal opinions from its Office of the General Counsel. These opinions, publicly available on the DFS web site, provided valuable guidance for insurance producers trying to comply with New York insurance laws. However, the department no longer offers that guidance; it has not posted a single opinion on its public site since 2011.
“Insurance agents and brokers spend every day helping households and businesses protect themselves against unexpected losses. Time they spend trying to parse the meanings of complex laws is time they cannot spend caring for their clients. If the department is unwilling to publish guidance for them, it is unfair and unreasonable for the governor and the legislature to hike penalties 1,000 percent. We urge the legislature to strip this proposal from the state budget.”
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