Imposing poorly written sales standards solely on life and annuity sellers in New York state could hurt the state’s life and annuity market, and on the consumers who depend on that market, 10 life and annuity groups say.
Mary Griffin, president of the Life Insurance Council of New York (LICONY), and representatives from nine other financial services groups have teamed up to oppose the proposed changes. The industry group reps are asking Maria Vullo, the superintendent of the New York State Department of Financial Services (NYDFS), and other regulators to rewrite the state’s new sales suitability standard update draft.
“If this proposal were to be adopted as currently drafted, we are gravely concerned that it will have a detrimental impact on New York consumers and could negatively affect their access to affordable products and information about annuities and life insurance,” Griffin and the other industry group leaders write.
NYDFS officials proposed updating the state’s annuity sales suitability standard in response to the U.S. Department of Labor’s decision to put off enforcing its own retirement products fiduciary rule implementation guidelines.
One major provision in the draft would apply a “best interest,” or a rule requiring the seller to act in the best interest of the client, to sales of life insurance as well as to sales of annuities.
Maria Vullo, the department superintendent, said in December, when the state’s draft sales standard update was released, that consumers who buy life insurance and annuity products deserve to have providers act in their best interest. “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,” Vullo said at the time.
Griffin and her colleagues argue that, in practice, the proposed changes would heap large amounts of red tape on consumers as well as on life insurers, insurance distributors and agents.
The New York draft extends protections to “transactions beyond the point of sale, including in-force ones, such as simple customer servicing functions (i.e.g, the exercising of contractual rights under the existing policy or contract,” the industry group leaders write. “Serious consideration needs to be given to the implications of these proposed expansions.”
If New York state has rules that are different from the national rules, that could hurt the players in the New York state financial services market, accelerating the decline in consumers’ use of both annuities and life insurance, the industry group leaders write.
The LICONY Team
In addition to Mary Griffin, the other leaders who signed the letter opposing the NYDFS sales standard proposal are Catherine Weatherford, president of the Insured Retirement Institute; Heather Briccetti, president of the Business Council of New York State; Joseph Tavernite, president of the National Association of Insurance and Financial Advisors-NY; Fred Holender, president of the Professional Insurance Agents of New York; David Stertzer, chief executive officer of the American Association of Life Underwriters; Kate Kiernan, a vice president at the American Council of Life Insurers; Lisa Bleier, associate general counsel at the Securities Institute & Financial Markets Association; Stephen Roth, on behalf of the Committee of Insurers; and David Bellaire, general counsel of the Financial Services Institute.
— Read State Insurance Regulators Could Set Their Own Best-Interest Standard on ThinkAdvisor.