NYDFS Proposes Amendments to Suitability Regulation

In late December 2017, the New York Department of Financial Services (“NYDFS”) published proposed amendments to New York’s Insurance Regulation 187 pertaining to Suitability in Life Insurance and Annuity Transactions.

The proposed amendments, which would incorporate life insurance into the suitability analysis for life insurance and annuity sales taking place in New York State, introduce a “best interest standard” which would be applicable to both life insurance and annuity products.

This development marks the first time since the NAIC explored developing a Model Regulation that initially sought to incorporate both life insurance and annuity products into the analysis. Based upon extensive review and comment by all interested parties including regulators, consumers and industry representatives, the NAIC’s initiative to apply suitability standards to life insurance products was scrapped due to the assessed impracticality of applying suitability standards the life insurance products and the expressed resistance of all interested parties.

These developments in New York State represent a potentially significant change to the manner in which life insurance companies sell life insurance products (as well as annuities) today.

A copy of the proposed amendments can be found here.

CEFLI will continue to monitor these developments to determine the implications of the proposed amendments for the compliance operations of life insurance companies.