New consumer protections for life insurance sales in New York
This is a new requirement that would require that the product that best reflects the customer's interest be offered ahead of what is most profitable to the seller.
The proposed regulation is also aligned with recently delayed federal regulations relating to retirement savings.
The federal Department of Labor Conflict of Interest Rule, which expands the definition of investment advice under the federal Employee Retirement Income Security Act, applies to certain annuity and life insurance sales and requires financial advisors to adhere to enhanced standards of conduct.
However, last month, DOL promulgated a regulation that once again delays the implementation of certain components of its fiduciary duty regulation until July 1, 2019.
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, beyond the types of advice covered by the DOL Rule, including both in the specific context of retirement planning and 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 transaction is considered in the best interest of a consumer when it is in furtherance of a consumer's needs and objectives and is recommended to the consumer without regard to the financial interest of the product seller.
Insurers would also be required to develop and maintain procedures to prevent financial exploitation of consumers.
The amendments supplement existing consumer protections that already exist in New York and that are key elements of the Conflict of Interest Rule, 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 60-day notice and public comment period following the December 27, 2017, publication in the New York State Register before its final issuance. ■