New York Department of Financial Services issued its First Amendment to Insurance Regulation 187 requiring recommendations with respect to both new and in-force annuity contracts and life insurance policies to be in the consumers’ best interest as of August 1, 2019 for annuities, and February 1, 2020 for life insurance. This means that not only must transactions of all annuities and life insurance be suitable for the consumer, but also in their best interest. NY defines best interest as “the recommendation is based upon an evaluation of relevant suitability information and reflects the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with the situation would use.” The producer or representative must have a reasonable basis to believe that the sales transaction is suitable and that the consumer has been reasonably informed of the various features of the policy and potential consequences of the of the sales transaction, both favorable and unfavorable, such as surrender period and surrender charge, any and all death benefit, mortality and expense fees, cost of insurance charges, investment advisory fees, policy exclusions or restrictions, charges for and features of riders, market risk, and differences among fee-based and commission -based versions of the policy, and the manner in which the producer is compensated for the sale and servicing of the policy.
In making a recommendation, a producer may weigh multiple factors that are relevant to the best interest of the consumer, including benefits provided by the policy, the price of the policy, the financial strength of the insurer, and other factors that differentiate products or insurers.
These requirements are applicable to any producer who materially participates in the making of recommendation and receiving compensation as a result of the sales transaction, regardless of whether the producer has had any direct contact with the consumer. Provided that product wholesaling is based only on generic client information and does not constitute participating in the making of a recommendation it is excluded from the requirements under the regulation. THIS PERTAINS TO THOSE OF YOU THAT ARE POINT OF SALE PEOPLE.
Insurers are responsible for making sure producers are trained in the requirements of Reg 187, so some of you may have specific requirement by carriers, or you may complete the course through Quest CE. The Leaders Group has a Client Recommendation Disclosure that will be required for all NY cases.
The full text of the regulation can be found here.
Download the Client Recommendation for Reg 187 Form here.