Life Bureau Filing Guidance Note

FAQs Regarding Insurance Circular Letter No. 6 (2023) and Accompanying Guidance

Guidance Date: July 23, 2025

On July 17, 2023, the Department issued Insurance Circular Letter No. 6 (2023) regarding Unfair and Unlawful Discrimination in the Sale of Life Insurance and Annuities in the Individual Market and Certain Group Markets (“Circular Letter”). The Circular Letter directed insurers to review their portfolios of products in light of the Circular Letter and take steps, as needed, to ensure compliance with the Insurance Law. On that same date, the Department posted Filing Guidance Related to Insurance Law §§ 2606(a)(1) and 4224(a)(1) (“2023 Guidance”) to assist insurers as they conducted the review of their portfolios. These Frequently Asked Questions are intended to provide clarification regarding questions that arose related to the Circular Letter and 2023 Guidance as insurers reviewed their portfolios as directed by the Circular Letter.

FAQ 1:  The Circular Letter indicates that the Department will apply the guidance in the Circular Letter to situations in which individual coverage is marketed through a group format, including any life insurance or annuity contracts sold through groups defined in Insurance Law §§ 4216(b)(13) and (14) and 4238(b)(6) and (10). Does the Department view the following contracts as individual coverage marketed through a group format:

1. Terminal funding contracts and close-out contracts issued to employer-sponsored retirement plans (aka pension risk transfer contracts, buy-out contracts, and buy-in contracts);
2. Unallocated guaranteed interest contracts or unallocated synthetic guaranteed interest contracts issued in connection with the stable value investment option offered under employer sponsored deferred compensation plans;
3. Group private placement variable annuities issued to employers in connection with an employer-sponsored, non-tax qualified, non-ERISA, deferred compensation plan;
4. Corporate owned group life insurance policies or bank owned group life insurance policies issued to employers pursuant to Insurance Law §§ 3205(a)(1)(B) and 3205(d) for the purpose of indemnifying employers against monetary losses resulting from the death of an insured key person employee or which is issued to employers for the purpose of funding broad-based employee benefit plans;
5. Structured settlement annuity contracts authorized by Insurance Law § 4238(b)(11); and
6. Funding agreements issued to the Federal Home Loan Bank in connection with the life insurance company’s exercise of borrowing privileges as a member of the Federal Home Loan Bank?

Response 1:  No, the Department does not view the foregoing contracts as individual coverage marketed through a group format. Given the nature of these contracts and the context in which they are issued, these contracts do not raise the same concerns about unfair discrimination as other products that are more in the nature of individual coverage with the group label. With regard to the contracts listed in items (a) through (d) above, the Department recognizes that because they are being issued in connection with employer-sponsored employee benefit plans, they must be tailored to each particular employer plan. Similarly, structured settlement annuity contracts listed in item (e) above need to be tailored to the terms of the court order or court approved settlement agreement, or both. Funding agreements listed in item (f) above are also unique in that they are issued in connection with an insurer’s exercise of borrowing privileges as a member of the Federal Home Loan Bank and need to be tailored to that purpose. Note that this response addresses the specific scenarios that were presented to the Department and is not intended to be an exhaustive list.

FAQ 2:  Section III.A.10 of the 2023 Guidance lists “Registered Security Dealers/Broker (Fee-based products)” as a recognized market or distribution channel distinction. Was Section III.A.10 meant to include registered investment advisors and fee-based financial planners?

Response 2:  Yes, Section III.A.10 of the 2023 Guidance was intended to address channels in which the insurance producer receives fee-based compensation from the consumer rather than commission-based compensation from the insurer. This would include registered investment advisors and fee-based financial planners who receive fee-based compensation rather than a commission. The Department recognizes that provisions in a contract designed to recoup unamortized acquisition expenses may not be needed in channels where commissions are not paid. For example, the Department has not objected to insurers having a different version of an annuity contract without a surrender charge that is used in the fee-based channel.

FAQ 3:  Section IV.A of the 2023 Guidance recognizes a distinction between “single premium” and  “flexible premium” products. Please confirm that a modified single premium product where premiums are permitted for a limited window during the first year of the contract would be viewed as a single premium product not a flexible premium product.

Response 3:  Yes, a modified single premium product that permits premiums only during the first year would be viewed as a single premium product not a flexible premium product.

FAQ 4:  Section III of the 2023 Guidance identifies recognized market or distribution channel distinctions.  Is it the expectation of the Department that all of an insurer’s products fall under one of the listed markets or channels?

Response 4:  No. The list in section III of the 2023 Guidance identifies special markets and distribution channels in which the Department has not objected to products differing from the products the insurer sells in the general market.

FAQ 5:  An insurer sells a product with a maximum issue age of 85 to all consumers. One insurance producer firm feels that the product is not suitable for anyone above age 80. Is it permissible for the insurer to develop alternate marketing material for use at this firm indicating that the insurer’s product is only available up to age 80? Also, is it permissible for the insurer to implement procedures to deny a policy to anyone over age 80 who applies through this firm?

Response 5:  No, separate marketing materials and practices designed to conceal options from some consumers that are available to other consumers in the same class or with equal expectation of life would result in unfair and unlawful discrimination under Insurance Law § 4224(a)(1). Similarly, denying applications from some consumers while accepting applications from other consumers in the same class or with equal expectation of life based solely on the identity of the insurance producer firm would result in unfair discrimination.

Making all products available to insurance producers is not the same as making all products available to consumers. Analysis of unfair and unlawful discrimination should be viewed from the perspective of the consumer. In the example presented, a consumer over age 80 should be made aware that the product is available to consumers up to age 85. However, the producer may recommend that the consumer not purchase the product if over age 80, provided that the producer complies with requirements of Insurance Regulation 187, including the requirement that the producer document and disclose the basis for this recommendation.

FAQ 6:  An insurer sells a fixed annuity that offers multi-year guarantee periods with and without a market value adjustment (“MVA”). An insurance producer firm does not want to offer consumers the guarantee periods with an MVA. The firm is requesting separate marketing materials and a separate application that omit the MVA guarantee periods.

1. May an insurer develop separate marketing materials, policy forms, and practices for this purpose?
2. If not, would inclusion of the MVA and non-MVA guarantee periods on the same application be an adequate control to prevent unfair discrimination where the insurer does not otherwise require producers to be trained on or offer to consumers everything in the application?
3. If not, would the following combination of controls adequately address the potential for unfair discrimination:  (1) inclusion of the MVA and non-MVA guarantee periods on the same application; (2) a requirement by the insurer that producers be trained on all options in the application; and (3) a requirement by the insurer that producers address all options in the application as part of the Insurance Regulation 187 disclosure of the basis of the recommendation to the consumer?

Response 6:

1. No, separate marketing materials, policy forms, and practices designed to conceal options from some consumers that are available to other consumers in the same class or with equal expectation of life would result in unfair and unlawful discrimination under Insurance Law § 4224(a)(1).
2. No, including options on an application that the consumer is not permitted to elect if working with a particular producer does not adequately address unfair and unlawful discrimination because benefits would continue to be available only through certain producers and, since not all consumers have access to those producers, consumers ultimately would not have access to products or benefits that are available to other consumers of the same class and with equal expectation of life.
3. Yes, this combination of controls, together with an ongoing system of supervision reasonably designed to ensure compliance with these controls, would address the potential for unfair and unlawful discrimination because the consumer would be made aware of all options and would receive an explanation from the producer trained on all the options detailing why the producer has determined that the options would or would not be suitable for and in the best interests of the consumer.

FAQ 7:  Would the Department recognize a product distinction under section IV.K of the 2023 Guidance for fixed accumulation annuities with an emphasis on accumulation versus fixed accumulation annuities with an emphasis on income?

Response 7:  No, all accumulation annuities have aspects of both accumulation and income. All accumulation annuities can be used to emphasize accumulation and all accumulation annuities can be used to emphasize income. Section II.A.6-9 of the 2023 Guidance already recognizes true income products as separate products (i.e. immediate annuities and paid-up deferred annuities).

FAQ 8:  Does the Circular Letter impact Section III of the September 11, 2019 Supplemental Guidance Regarding Section 224.6(h) of Insurance Regulation 187 (“2019 Guidance”)?

Response 8:  Yes, Section III of the 2019 Guidance should be viewed in light of the Circular Letter. The options in section III of the 2019 Guidance were intended as an interim measure while the Department explored more broadly the potential unfair discrimination issues that were ultimately addressed in the Circular Letter. It is the Department’s expectation that the need for option 2 in Section III of the 2019 Guidance may be eliminated as a result of insurers adjusting their portfolios and implementing controls in connection with the Circular Letter.

Please direct any questions about this filing guidance note to [email protected].