For the first time, life insurers would be required to give New York State regulators and consumers advance notice of when the companies intend to raise premiums on life insurance and annuity policies, under a new rule proposed by the state Department of Financial Services.
A 45-day comment period about the new proposal would begin once it is published in the official State Register on Nov. 30. If left unaltered by the department based on that feedback, the regulation would go into effect in early 2017, according to the department.
The department said it developed the new rule in response to complaints it has received from New York consumers, including many owners of older policies taken out years or decades ago, who said their insurers had not informed them of large, immediate premium increases. DFS spokesman Richard Loconte said Friday the complained-of premium hikes have at times been 100 percent or more.
Years of relatively low interest rates and returns on investments have been cited by life insurers for lowering the profitability of their investments and forcing them to hike premiums.
Under the new rules, life insurers must inform DFS of premium increases on non-guaranteed life and annuity polices at least 120 days prior to imposing the higher charges.
The regulations would also require that consumers receive notices at least 60 days prior to premium hikes.
No notifications are now required.
Insurers in New York are not currently required by law to inform consumers of policy premium hikes. (Photo: iStock)
“Under New York law, life insurers may only increase the cost of insurance on in-force policies when the experience justifies it and only in a way that is fair and equitable,” DFS Superintendent Maria Vullo said in a statement. “Many existing life insurance and annuity policies are owned by New York’s senior citizens who have dutifully paid premiums for years and can least afford increased costs to maintain insurance coverage.”
Loconte said the change will allow New York regulators to get in front of premium increases that may be made in violation of state laws that limit non-guaranteed rate increases on life insurance and annuity policies that are “fair and equitable.”
DFS is sometimes able to determine that premium hikes have been made contrary to state law, but only based on annual filings the department requires of all insurers, Loconte said. By the time the state discovers improper increases and orders restitution to consumers and penalties to insurers, a year or more may have passed where improper increases were collected, according to the spokesman.
The Life Insurance Council of New York, which represents most major life insurers in the state, said it will solicit comments from its members about the proposed regulation and file them with the financial services department.
“We look forward to providing the department with the industry’s perspective on this issue,” council spokesman Andrew Rush said Friday. “The life insurance industry provides financial security to millions of policyholders and we are proud of our role in helping secure the financial future of families in New York and across the country.”
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