Two lawmakers in New York state want to replace the state's rules for replacing life insurance policies and annuities.
The state requires agents and brokers who are helping with replacements to conduct thorough reviews of the available alternatives.
The comparison process "results in a lengthy delay (sometimes up to a month) in completion of the transaction," the lawmakers said in a statement.
The lawmakers want New York to adopt product replacement rules based on a National Association of Insurance Commissioners model that's used in the rest of the country.
What it means: Many advocates for retirement product sales rules based on Regulation Best Interest or a fiduciary standard want advisors to conduct detailed comparisons when making recommendations.
The New York state life and annuity replacement bill shows that tough comparison requirements may conflict with the goal of offering retirement savers a fast, painless purchasing process.
The legislation: Assemblyman Phil Steck, D-Schenectady, introduced A00854, the state Assembly version of the life insurance and annuity rule update bill.
Sen. Leroy Comrie, a Democrat, introduced S05238, the state Senate's version of the bill.
The product comparison problem: One obstacle to making a product comparison process work efficiently is problems with getting other parties to supply information, Steck and Comrie said in their statement.
When a New York producer is helping a client replace a life insurance policy or annuity contract, regulations require the insurer to provide information about the product being replaced, but the insurer may not be overly motivated to do that, the lawmakers said.
Occasionally, the lawmakers said, the replacement process takes so long a client dies while the product comparison review is underway.
The strategy proposed: Steck and Comrie said their bill would replace the detailed product comparison process with providing general advice about what clients should consider when replacing life insurance policies or annuities.
A producer would still have to verify whether a replacement transaction and the alternative product being recommended suited the needs of the client, the lawmakers said.
A view of the dome in the Court of Appeals Hall in Albany, New York. Photo: Ryland West/ALM
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