Lincoln The Latest Carrier To Pull Life Products From New York

By Steven A. Morelli

Lincoln Financial is the latest company pulling insurance products out of New York.

Lincoln is exiting because of its electronic signature process does not comply with the state’s requirements, according to the company’s statement.

“Recently, as part of a review of its electronic signature processes, Lincoln Life & Annuity Company of New York (Lincoln) became aware that the application currently used for its life insurance products sold in New York, does not comply with New York’s requirements for use with electronic processes and platforms,” according to the statement. “Therefore, Lincoln will be suspending new sales of certain term and indexed universal life products in New York until a new, electronic-compliant application and process can be implemented. In conjunction, all electronic processes for Life Insurance product sales in New York will be suspended. These changes do not impact existing policyholders.”

Lincoln is just the latest of many companies that have pulled products from New York under pressure from regulations as well as market conditions such as persistent low interest rates.

For example, John Hancock pulled several life products, leaving only Accumulation IUL and Protection Term as the products it sells in New York.

Regulation 187, a fiduciary standard that covers insurance, took effect in 2019 as state officials bypassed a National Association of Insurance Commissioners' effort to create a model standard for annuity sales. The New York regulation applies to life insurance sales as well and sets a high bar for a sale to be in the consumers' best interest.

'Frustrating'

The regulation was overturned by the state Supreme Court on April 29 in an appeal brought by the Big I NY with support of its national organization, Independent Insurance Agents and Brokers Association. The ruling said the state Department of Financial Services overreached with the regulation and called the rule unreasonable, arbitrary, capricious, unconstitutionally vague and lacks a rational basis.

After the ruling, the department said in a statement that it was reviewing the ruling, but it did not return a recent request for an update or if the state is aware how many carriers have pulled products. The Big I said today that the state is appealing but the court has not yet set up briefing dates.

On the rule itself, you can add “frustrating” to the court’s description, according to many insurance agents and brokers in the state.

Yoel Yitzchok Bodek, CEO of Broker Central in Airmont, N.Y., said he understands the intent of the rule, but complying with it is extremely difficult. The vague terminology leaves carriers to decide for themselves how to comply and to establish their own practices. That leads to situations such as companies having their own distinct Reg 187 courses with their specific instructions.

“MassMutual, and they’re not the only one, has one Reg 187 class for one term product and then different Reg 187 classes for the various whole life products. So, unless you've gone through every one of them, you can't sell the products,” Bodek said. “And then on the submitting side of it, some companies just ask the advisor to attest that they’ve gotten Reg 187 in check and taken the informational courses, and they're satisfied with that, while the other is making you go through a five-page customer profile.”

Difficult To Manage

Bodek said having customer suitability profiles is good in itself, but the different standards make business more difficult to manage. Broker Central, an independent brokerage general agency representing many carriers, has set up standards sheets and processes for its 250 agents to follow for different products. It becomes particularly problematic when an agent finds a suitable product for the client but has not been up to all the compliance points for that particular product.

“They propose a product, they take an application and send that in to us,” Bobek said. “Then we've got to turn around and say, ‘Hey, Jack, you've got to go back again because before you sign the application, you got to make sure that you've complied with the specific carrier’s 187.’ So, it's unnerving. But I think at this point, as a BGA, we've conditioned ourselves to it.”

Bobek said he plans to get more involved with the National Association of Insurance and Financial Advisors of New York to help with the issue. NAIFA-New York and the Professional Insurance Agents association were part of the Big I NY lawsuit but dropped out of the suit before the appeal. Big I NY, primarily a property and casualty association, was alone in the appeal.

Gary F. Cappon, NAIFA-NY president, said in a statement that Regulation 187 and the carrier exodus are the association’s primary advocacy issues for the coming year. The association did not have a tally of what carriers have left the state, but Cappon said the exits are “disproportionately impacting low and moderate income families that depend on affordable term life options.”

He added that NAIFA-NY is putting together a committee to look into the issues.

“We are reaching out to our insurance industry partners to form a workgroup to identify the primary reasons that are contributing to the departure of companies and products, as well as common sense solutions that will create a more favorable environment and attract new opportunities or the return of those who have left,” according to the statement. “Our objective will be to work closely with state regulators and lawmakers to implement solutions to promote greater availability of products and services, while continuing to protect consumers.”

Steven A. Morelli is a contributing editor for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].