The New York Department of Financial Services has appealed an April 29 decision by a state court tossing out Regulation 187, the state's tough rules governing the sales of life insurance and annuities.
The appeal was expected and confirmed by a source with the DFS. The appeal goes to the New York Court of Appeals, which is the state’s highest court.
At issue is whether the DFS has the authority to make the sales rules.
The April state Supreme Court Appellate Division reversed a 2019 ruling by Justice Henry Zwack that the DFS was within its authority when it issued Regulation 187.
Regulation 187, often described as similar to a fiduciary standard, 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 sets a high bar for a sale to be in the consumers' "best interest."
The appellate division ruled that the DFS set the bar too high.
"While the consumer protection goals underlying promulgation of the amendment are laudable, as written, the amendment fails to provide sufficient concrete, practical guidance for producers to know whether their conduct, on a day-to-day basis, comports with the amendment's corresponding requirements for making recommendations and compiling and evaluating the relevant suitability information of the consumer," the court decision reads.
Producers would have unreasonable difficulty attempting to comply with regulation requirements that are often "subjective," the court ruled.
"Once a recommendation is deemed to have been made, the guidelines with respect to the suitability information that producers must obtain from the consumer and the suitability considerations that must necessarily be disclosed are inadequate to the extent that they rely upon subjective terms that lack long-recognized and accepted meanings and provide insufficient guidance with respect to how producers must conduct themselves in order to comply with the amendment," the ruling said.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected] Follow him on Twitter @INNJohnH.
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