NOTICE OF PUBLIC HEARING
Suitability in Life Insurance and Annuity Transactions - July 8, 2009
The New York State Insurance Department will conduct public hearings in Buffalo, Albany, New York City and Old Westbury to gather information about the issue of suitability in the sale of life insurance policies and annuity contracts. The goal is to help ascertain whether additional oversight and regulation are needed to protect consumers when they are considering the purchase of life insurance or annuities in New York State, and if so, to help determine the scope of such oversight and regulation.
In recent years, life insurance and annuities purchases have become increasingly complex financial transactions. Indeed, there has been a proliferation of new products, particularly in the area of annuity contracts, which are now offered to consumers of all ages. Concerns over sales of annuities, particularly to senior citizens, have led regulatory agencies nationwide to investigate whether insurers and insurance producers are sufficiently evaluating the suitability of life insurance policies and annuity contracts for particular consumers and recommending to consumers only policies and contracts that meet their particular needs (based on the consumer’s financial status, investment objectives, tax implications and other relevant information).
The National Association of Insurance Commissioners (“NAIC”) has adopted a Suitability in Annuity Transactions Model Regulation (the “NAIC Model”), and more than 30 states have implemented some form of the NAIC model by statute or regulation. Recently, the NAIC circulated a proposed draft revision to the model regulation.
The Financial Industry Regulatory Authority (“FINRA”) also regulates the sale of certain variable annuities. FINRA Rule 2310 (Recommendations to Customers) and FINRA Rule 2821 (Members’ Responsibilities Regarding Deferred Variable Annuities) both apply to certain variable annuity transactions throughout the country.
New York has not adopted the NAIC Model and does not currently have a regulation or statute that specifically bans unsuitable sales. In the 1990s New York changed its regulatory scheme in an effort to ensure suitable sales of life insurance and annuities by enhancing disclosure and comparison requirements. In 1998, the Insurance Department’s Suitability Report stated:
Under the current framework, the law assumes that an informed consumer is the best judge of what may be suitable or appropriate for himself or herself. As products become more complex and sophisticated, the need for professional advice and assistance increases and this assumption can be questioned. Recent legislative and regulatory changes made to improve the disclosure and information provided to consumers may restore the balance and legitimacy of the assumption. Additional time is needed to assess the efficacy of the new regulations noted above.
In recent years, questions have been raised about the effectiveness and efficiency of the disclosures and comparisons required by 11 NYCRR Part 51 (“Regulation 60”). The required disclosures and comparisons may in some instances be so complex that they are not meaningful to consumers. The hearings will explore whether the disclosures are effective in educating consumers and whether the compliance costs associated with Regulation 60 in particular outweigh its benefits.
The purpose of the hearings is to gather information from the public relating to life insurance or annuity sales transactions, and to hear any concerns that the public may have about unsuitable sales. The Department welcomes input from individual consumers who have been sold unsuitable or inappropriate life insurance policies or annuity contracts; consumer representatives; insurance companies and their trade associations; insurance producers and their trade associations; senior citizen organizations; academics; and members of the general public with experience or expertise on the subject of suitability in the sale of life insurance or annuities. Oral and written testimony should focus on the consumer experience with the sale of annuities or life insurance in New York.
Oral and written testimony should address one or more of the following issues:
- Whether there is a problem concerning unsuitable sales of life insurance and annuities in New York;
- Whether the New York Insurance Department should promulgate a new regulation to bar unsuitable sales of life insurance and annuities;
- Whether any potential New York regulation should be based on the current NAIC Model, the draft revision of the NAIC Model or the FINRA rules concerning suitability;
- Whether any potential New York regulation should apply to the sales of all life insurance policies and annuity contracts or some subset thereof; and
- Whether Regulation 60 should be revised to create more meaningful disclosures and/or reduce the costs of compliance.
Any member of the public may testify at these hearings or submit written comments. Information on the hearings is available at the Department’s website, www.ins.state.ny.us. Testimony can be scheduled and written testimony submitted through the website.
Written comments for the hearing record may also be submitted to Suitability Hearings, Public Affairs Bureau, New York State Insurance Department, 25 Beaver Street, New York, NY 10004, or e-mailed to PublicHearingsComments@ins.state.ny.us with the subject line “SUITABILITY HEARINGS.” Comments will be accepted by the Department for up to 15 business days after the public hearing.
In accordance with the Americans with Disabilities Act, the Insurance Department will provide a reasonable accommodation, including interpreter services for the hearing impaired, at no charge to any covered individual wishing to testify at these hearings, provided that such a request is received at least five business days prior to the particular hearing date and either communicated in writing to Suitability Hearings, Public Affairs Bureau, New York State Insurance Department, 25 Beaver Street, New York 10004, or by calling the Insurance Department at (212) 480-5262.
The hearings will be webcast live. Information on the hearings, including directions to the locations and how to watch the webcast is available on the Department’s website at www.ins.state.ny.us.
The public hearings are scheduled as follows:
August 6 at 10 a.m.
Buffalo & Erie County Public Library
Mason O. Damon Auditorium
August 13 at 10 a.m.
Albany Convention Center
Meeting Room 6
Empire State Plaza
September 9 at 10 a.m.
SUNY College at Old Westbury
Old Westbury, NY
|New York City:|
September 16 at 10 a.m.
Adam Clayton Powell Jr. State Office Building
163 West 125th Street (at 7th Avenue)
New York City, NY 10027
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