Regulatory Impact Statement for the adoption of the First Amendment to 11 NYCRR 57 (Insurance Regulation 113).
1. Statutory authority: Financial Services Law ("FSL") sections 202 and 302; and Insurance Law ("Ins Law") sections 301, 2403, 3201, 4217, 4221, 4224, 4511 and 4517.
FSL section 202 describes the powers of the Superintendent of Financial Services generally.
FSL section 302 and Ins Law section 301, in material part, authorize the Superintendent to effectuate any power accorded to the Superintendent by the Financial Services Law and the Insurance Law, and to prescribe regulations interpreting them.
Ins Law section 2403 describes prohibited trade practices that constitute determined violations.
Ins Law section 3201 provides that no life insurance policy form may be delivered or issued for delivery in this state unless it has been filed with and approved by the Superintendent as conforming to the requirements of the Insurance Law, and not inconsistent with law.
Ins Law section 4217 governs the valuation of life insurance policies, including the calculation of reserves and use of mortality tables.
Ins Law section 4221 is the standard nonforfeiture law for life insurance and sets forth certain minimum requirements for life insurance policies.
Ins Law section 4224 prohibits unfair discrimination between individuals of the same class and equal expectation of life, and requires that any difference in treatment be based upon sound actuarial principles.
Ins Law sections 4511 and 4517 govern life insurance certificates issued by fraternal benefit societies, including their nonforfeiture benefits and valuation.
2. Legislative objectives: The proposed amendment to the rule comports with the public policy objective of Insurance Law section 4224 by ensuring that individuals of the same class and equal expectation of life are treated the same and that any difference is based on sound actuarial principles, is not unfair, and is clearly disclosed to insureds and potential insureds, thereby implicating Insurance Law sections 3201 (approval of filings), 4217 (use of mortality tables and reserves calculations), 4221 (minimum nonforfeiture requirements), and 4511 and 4517 (life insurance certificates issued by fraternal benefit societies). The rule, as amended, will ensure that an insured will not be classified as a smoker or tobacco user by an insurer unless the insured actually smokes or uses tobacco or nicotine products. Currently, some insurers re-classify certain insureds as smokers or tobacco users upon the attainment of a specified age without evidence of the insured’s actual tobacco or nicotine usage. The amendment will also require insurers to provide notice of any procedures to seek reclassification of their risk classification.
3. Needs and benefits: This is one of several Parts that address the use of mortality tables by insurers. It focuses on the classification of individuals as smokers or nonsmokers and the use of smoking/nonsmoking tables. Some insureds are automatically reclassified as "smokers" under their life insurance policies upon attainment of a specified age or are unaware that the insurer has procedures for the insured to seek reclassification as a nonsmoker. This amendment creates a presumption that every insured qualifies for a non-smoker class unless the insurer, in responding to a request for insurance coverage, has identified the insured in accordance with its underwriting rules or procedures as one who smokes or uses tobacco or nicotine. The amendment prohibits changing coverage issued as "nonsmoker" to "smoker." The amendment requires the policy to describe any procedures for reclassification. Thus, when a juvenile becomes an adult, coverage will continue to be based on the class assigned at the time coverage was issued and the insurer may not reclassify the smoking status. In addition, some minor technical changes are being made to the rule, such as updating language for consistency purposes and reformatting the rule for clarity. These changes do not substantively alter the meaning of any affected provision.
4. Costs: The cost for life insurers and fraternal benefit societies to comply with the proposed amendment to the rule should be nominal. While some changes in classification may necessitate training for the insurer’s personnel, the revised rule only affects classification without substantially affecting the underwriting process. There should be no additional costs imposed upon the Department or other state agencies or local governments as a result of this amendment.
5. Local government mandates: The proposed amendment to the rule imposes no new programs, services, duties or responsibilities on any county, town, village, school district, fire district or other special district.
6. Paperwork: The proposed amendment to the rule does not impose any additional reporting requirements on the affected life insurers or fraternal benefit societies.
7. Duplication: The proposed amendment to the rule is not duplicative of any other rule, and changes are made to coordinate with 11 NYCRR 100 (Insurance Regulation 179).
8. Alternatives: The only alternative to the proposed amendment to the rule is to maintain the status quo and allow insureds to be classified as smokers even though they may be non-smokers. This alternative does not meet the legislative objective and was therefore rejected.
9. Federal standards: There are no analogous federal standards.
10. Compliance schedule: This amendment will take effect 180 days after Notice of Adoption is published in the State Register, except for section 57.5 which will take effect 270 days after Notice of Adoption is published in the State Register, to allow enough time for insurers to adjust their classification procedures.
Regulatory Flexibility Analysis for small businesses and local governments for the First Amendment to 11 NYCRR 57 (Insurance Regulation 113).
The Department has determined that the rule will not impose any adverse economic impact or reporting, recordkeeping or other compliance requirements on small businesses or local governments. The basis for this finding is that this rule is directed at life insurance companies and fraternal benefit societies that are licensed to do a life insurance business in New York State, none of which is a local government or falls within the definition of "small business" as defined in section 102(8) of the State Administrative Procedure Act.
Statement setting forth the basis for the finding that the 1st Amendment to 11 NYCRR 57 (Insurance Regulation No. 113) will not impose adverse economic impact or compliance requirements on rural areas
1. Types and estimated numbers of rural areas: The proposed amendment applies equally to urban and rural areas throughout the State.
2. Reporting, recordkeeping and other compliance requirements, and professional services: The reporting, recordkeeping and compliance requirements for the proposed amendment are the same across the state. No special professional services will be required in a rural area to comply with the proposed rule.
3. Costs: The proposed amendment is not expected to result in any additional costs since it reflects a change in the substantive underwriting rule without affecting the underwriting process itself.
4. Minimizing adverse impact: The proposed amendment does not have any adverse impact on rural areas.
5. Rural area participation: Public participation in the preparation of this rule was afforded by the public comment period solicited when the proposed rule was published on the Department’s website.
Statement setting forth the basis for the finding that the First Amendment to 11 NYCRR 57 (Insurance Regulation 113) will not have a substantial adverse impact on jobs and employment opportunities.
The Department of Financial Services finds that this rule will have little or no impact on jobs and employment opportunities. The proposed rule provides that juveniles must be treated as non-smokers unless an insurer has evidence to the contrary. The rule does not change the underwriting process in any way that would require staffing changes.