New York Regulators Take Aim At Life Insurance Premium Hikes

Financial Services Superintendent Maria T. Vullo announced that the New York State Department of Financial Services (DFS) has proposed a new regulation to govern life insurance company practices related to increases in the premiums of certain life insurance and annuity policies. The proposed regulation, which provides DFS the opportunity to review increases prior to implementation, requires life insurers to notify DFS at least 120 days prior to an adverse change in non-guaranteed elements of an in-force life insurance or annuity policy. New York Insurance Law prohibits life insurers from changing non-guaranteed elements in a discriminatory way for members of the same class of policyholders. Only certain enumerated factors, which do not include profit, can be considered when seeking to change non-guaranteed elements.

"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,” said Superintendent Vullo. “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. DFS will not stand by and provide life insurers free reign to implement unjustified cost of insurance increases on New Yorkers simply to boost profits.”

Decreased profitability due to low interest rates and, in some cases, adverse mortality experience, has moved certain life insurers to significantly increase the cost of insurance on older life insurance policies. In response to consumer complaints, a DFS review found that some insurers have not been implementing these increases in accordance with DFS approved policy provisions and the relevant provisions of the New York Insurance Law.

In addition to notifying DFS, the proposed regulation requires life insurers to notify consumers at least 60 days prior to an adverse change in non-guaranteed elements of an in-force life insurance or annuity policy.

“Regulators should know ahead of time about any planned price increase so they can make sure it’s justified, and consumers should know so they’re prepared,” said Beth Finkel, AARP New York State Director. “Advance notice allows both regulators and consumers to take appropriate action. AARP fully supports this common sense consumer protection.”

The proposed regulation is subject to a 45 day public comment period following publication in the State Register on November 30, 2017 before its final issuance. All questions and comments regarding the proposed rule should be emailed to William Carmello at [email protected].