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You are here: Home1 / Administrative Law2 / ​ AN AMENDED REGULATION DESIGNED TO PROTECT THE INTERESTS OF LIFE-INSURANCE A...
Administrative Law, Constitutional Law, Consumer Law, Insurance Law

​ AN AMENDED REGULATION DESIGNED TO PROTECT THE INTERESTS OF LIFE-INSURANCE AND ANNUITY CONSUMERS IS NOT VOID FOR VAGUENESS AND WAS PROPERLY CRAFTED AND ISSUED BY THE NYS DEPARTMENT OF FINANCIAL SERVICES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Singas, reversing the appellate division, determined an amended regulation designed to protect the interests of life-insurance and annuity consumers was not void for vagueness and was properly crafted and issued by the NYS Department of Financial Services (DFS):

The amendment addressed concerns that the purchase of annuities and life insurance had become increasingly complex with more products available to purchase. DFS reasoned that consumers, finding themselves more reliant on professional advice in order to understand the options available and to make purchasing decisions, had become more susceptible to producers and insurers recommending transactions that prioritized their own compensation over the consumer’s best interest … . The amendment … extended the scope of the regulation to cover both annuity and life insurance contracts, and created a new standard applicable when producers and insurers make “recommendations” to consumers. The amended regulation, which applies to both “sales transactions” and “in-force transactions” … , requires that producers, or insurers when no producer is involved, act in the “best interest of the consumer” when making a “recommendation” … .

The producer or insurer must, among other things: make “reasonable efforts” to obtain the consumer’s “suitability information”; base any recommendation “on an evaluation of the relevant suitability information” that “reflects the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use under the circumstances then prevailing”; “[o]nly [consider] the interests of the consumer . . . in making the recommendation” and not be influenced by compensation or other incentives; recommend only “suitable” transactions; and have a “reasonable basis” to believe that the consumer has been reasonably informed of the features of the policy, the potential consequences of the transactions, both favorable and unfavorable, and that the consumer would benefit from certain features of the policy and the particular policy as a whole … . Matter of Independent Ins. Agents & Brokers of N.Y., Inc. v New York State Dept. of Fin. Servs., 2022 NY Slip Op 05917, CtApp 10-20-22

Practice Point: An amended regulation designed to protect the interests of life-insurance and annuity consumers is not void for vagueness and was properly created and issued by the NYS Department of Financial Services. The amendment seeks to ensure the advice given to consumers does not place the financial compensation of the insurer ahead of the best interests of the consumer.

 

October 20, 2022
Tags: Court of Appeals
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https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2022-10-20 15:14:182022-10-21 15:47:02​ AN AMENDED REGULATION DESIGNED TO PROTECT THE INTERESTS OF LIFE-INSURANCE AND ANNUITY CONSUMERS IS NOT VOID FOR VAGUENESS AND WAS PROPERLY CRAFTED AND ISSUED BY THE NYS DEPARTMENT OF FINANCIAL SERVICES (CT APP).
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