Best’s Special Report: New Regulation May Impact Life/Annuity Sales Practices and Products in New York State
According to a Best’s Briefing, titled, “Regulation 187 May Impact Sales Practices and Products Sold in N.Y.” insurers will most likely incur higher costs, as training will be needed for both producers and insurers’ sales support functions. Suitability requirements vary depending on the type of product involved in a transaction. Regulation 187 requires less stringent suitability categories for term life products having no cash value and limited optionality than it does for other life and annuity products. These suitability categories apply to any sales or in-force transactions. Sales transactions are considered as a policy purchase, replacement or conversion, or any modification of an in-force policy that leads to new sales compensation, according to the report.
The report also notes that in-force transactions may pose a challenge for insurers and producers, as the suitability criteria may not have been met at the original point of sale. Under the new regulation, producers and insurers must have a reasonable basis to believe consumers have been informed of both the favorable and unfavorable features of a policy. In addition to product features, the benefits of deferred tax growth need to be understood, as well as suitability of fund choices and rider options for products such as variable annuities or other products with such choices.
While
To access the full copy of this Best’s Special Report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=279929.
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