New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT

25 BEAVER STREET
NEW YORK, NEW YORK 10004

Eliot Spitzer
Governor
Eric R. Dinallo
Acting Superintendent

The Office of General Counsel issued the following opinion on February 6, 2007, representing the position of the New York State Insurance Department.

Re: Regulation 60 requirements applicable to replacement of a life insurance policy or annuity contract

Question Presented:

Do the notification requirements of N.Y. Comp. Codes R. & Regs. tit. 11, Part 51 (2003) (Regulation 60) apply to a new individual life insurance policy (hereinafter, "life policy") or annuity contract (hereinafter, "annuity") delivered or issued for delivery in New York State by an authorized insurer that replaces an individual life policy or annuity delivered or issued for delivery in another State by a different insurer?

Conclusion:

Yes. The requirements of Regulation 60 apply to the new individual life policy or annuity replacement being delivered or issued for delivery in New York State by an authorized insurer, and not to the replaced life policy or annuity delivered or issued for delivery in another State by a different insurer.

Facts:

The inquirer reports that she represents an authorized insurer (hereinafter, "the insurer") that sells life policies and annuities in New York State. One of the insurer's licensed insurance agents received an application for a new individual life policy or annuity to be delivered or issued for delivery in New York State. The applicant indicated that an individual life policy or annuity delivered or issued for delivery in another State by a different authorized insurer would be replaced. The inquirer is not certain whether the application referred to is a life policy or annuity. The replacement has not yet occurred. The inquirer asks whether the requirements set forth in Regulation 60 would apply to the insurer and its agent. The replacement, if any, will occur after receipt of this Opinion.

Analysis:

Section 51.2(a) of Regulation 60 is relevant to your inquiry. It states in pertinent part:

(a) The term replacement of a life insurance policy or an annuity contract as used in this Part means, except as exempted in section 51.3 of this Part, that new life insurance or new annuities are to be purchased and delivered or issued for delivery in New York and it is known to the department licensee that, as part of the transaction, existing life insurance policies or annuity contracts have been or are likely to be:

(1) lapsed, surrendered, partially surrendered, forfeited, assigned to the insurer replacing the life insurance policy or annuity contract, or otherwise terminated; . . . .

Thus, under the plain terms of Section 51.2, a new life policy or annuity delivered or issued for delivery in New York State comes within the scope of Regulation 60.

In the situation that the inquirer presents, Regulation 60's requirements would apply to the insurer's replacement of the life policy or annuity because the new individual life policy or annuity would be delivered or issued for delivery in New York State, and it would replace an existing life policy or annuity. Moreover, none of the exceptions set forth in Section 51.3 of Regulation 60 are relevant here.

Finally, under the facts that the inquirer presents, the replaced insurer is an authorized insurer. But if the replaced insurer were an unauthorized insurer, and if it did not submit the requested information necessary to complete the "Disclosure Statement" (Appendix 10A or 10B), the agent, broker and/or insurer would have to use an approximation pursuant to Section 51.5(c)(2) of Regulation 60. See OGC Opinion Number 02-12-16 (12/18/2002). See that OGC Opinion and relevant Circular Letters, Numbers 5 and 6, from 2006.

For further information you may contact Senior Attorney Robert Freedman, at the New York City Office.