Weekly Feature

2018-01-11 / Business

Consumer protections proposed for life insurance, annuity products

Gov. Cuomo Gov. Cuomo Gov. Andrew M. Cuomo last week said the Department of Financial Services has proposed new consumer protections that would adopt a “best interest” standard for those licensed to sell life insurance and annuity products.

He said the protections would mandate 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.

“As Washington continues to ignore and roll back efforts to protect Americans, New York will continue to use its role as a strong regulator of the financial services and insurance industries to fight for consumers and help ensure a level playing field,” Cuomo said. “With these commonsense reforms we are working to protect everyday New Yorkers and give them peace of mind when purchasing these products.”

Financial Services Superintendent Maria Vullo said consumers who purchase life insurance and annuity products deserve to have financial services providers act in their best interest when providing advice.

“Given the key role insurance products play in providing financial security to middle class New Yorkers, it is essential that a provider adhere to a higher standard of care and only recommend insurance and annuity products that are in the consumer’s best interests,” she said.

Officials in the Governor’s Office said 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 advisers 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.

Governor’s Office officials said 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.

This would include 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.

Officials added that 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 proposed amendments are subject to a 60-day notice and public comment period.

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