April 27, 2018
Contact: Richard Loconte, 212-709-1691
DFS ISSUES UPDATED PROPOSED LIFE INSURANCE AND ANNUITY SUITABILITY REGULATION REQUIRING A BEST INTEREST STANDARD TO PROTECT CONSUMERS FROM CONFLICTED ADVICE
Proposed Rule Aims to Ensure That Recommendations Related to Life Insurance and Annuities Are in Consumers’ Best Interest
Financial Services Superintendent Maria T. Vullo today announced that the New York State Department of Financial Services (DFS) has updated its proposed regulation to adopt a "best interest" standard for those licensed to sell life insurance and annuity products to protect New York State consumers from receiving conflicted advice from agents, brokers or insurers. The proposed regulation will also require insurers to establish standards and procedures for recommendations to consumers with respect to life insurance policies and annuity contracts issued in New York State so that any sales transaction with respect to the insurer’s policies is in the best interest of the consumer and appropriately addresses the insurance needs and financial objectives of the consumer at the time of the transaction.
“New Yorkers must be confident that the insurance agents, brokers and companies that they rely on are recommending the right products for them, and that the consumer’s best interests are paramount,” said Superintendent Vullo. “This updated proposal allows an appropriate period of time for regulated entities to review the rule before it becomes final and to put in place protocols for ensuring these important consumer protections.”
The proposed amendments to New York's current suitability regulation would provide for a best interest standard of care for all sales of life insurance and annuity products, whether in the specific context of retirement planning and also when recommendations are made prior to the sale of an insurance product or after the sale but during the servicing of the product for the consumer. A sales transaction is considered in the best interest of a consumer when it is in furtherance of a consumer's needs and objectives and is made with the care, skill, prudence and diligence necessary. The financial or other interest of the producer, insurer or any other party other than the consumer shall not be considered in any respect. Insurers will also be required to develop and maintain procedures to prevent financial exploitation of consumers.
DFS carefully considered all comments submitted regarding the prior proposed regulation during the 60-day comment period, which ended on February 26, 2018, and has incorporated those suggestions that DFS deemed appropriate in an updated regulation.
The amendments supplement existing consumer protections that already exist in New York including setting reasonable limits on compensation and compensation transparency for the sale of a life insurance or annuity product in New York State.
The proposed amendments are subject to a 30-day notice and public comment period following publication in the New York State Register before its final issuance.