S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   2077
 
                        2017-2018 Regular Sessions
 
                             I N  S E N A T E
 
                             January 12, 2017
                                ___________
 
 Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
   printed to be committed to the Committee on Insurance
 
 AN ACT to amend the  insurance  law,  in  relation  to  direct  response
   marketing of life insurance
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Section 3209 of the insurance law, as  amended  by  chapter
 616 of the laws of 1997, subsection (b) as amended by chapter 170 of the
 laws of 2008, subparagraph (H) as amended, subparagraph (I) as added and
 subparagraph (J) of paragraph 2 of subsection (b) as relettered by chap-
 ter  535 of the laws of 2013, paragraph 1 of subsection (d), paragraph 2
 of subsection (e) and subsection (h) as amended by  chapter  13  of  the
 laws of 2002, is amended to read as follows:
   §  3209.  Life  insurance, annuities and funding agreements disclosure
 requirements. (a) Except as hereafter exempted, this section shall apply
 to any solicitation, negotiation or procurement of life insurance, annu-
 ities or funding agreements occurring within this  state.  This  section
 shall  apply  to  any  issuer  of life insurance or annuity contracts or
 funding agreements, including fraternal benefit societies and  the  life
 insurance  department  of a savings and insurance bank. Unless otherwise
 specifically included, this section shall  not  apply  to:  credit  life
 insurance;  group  life  insurance;  life  insurance  policies,  annuity
 contracts, and funding agreements issued in connection with pension  and
 welfare  plans  as  defined  by and to the extent covered by the federal
 Employee Retirement Income Security Act of 1974 (ERISA); funding  agree-
 ments  issued  to  other  than individuals pursuant to subsection (b) of
 section three thousand two hundred twenty-two of this article;  and  any
 group  annuity  unless  at least one certificate is subject to paragraph
 two of subsection (b) of section four thousand two hundred  twenty-three
 of this chapter.

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD06870-02-7
              

 S. 2077                             2
 
   (b)  (1)  No policy of life insurance shall be delivered or issued for
 delivery in this state [after the  applicable  effective  date,  as  set
 forth  in subsection (n) of this section,] unless, AT OR PRIOR TO DELIV-
 ERY OF THE POLICY, the prospective purchaser has been provided with  the
 following:
   (A)  a  copy  of  the  most recent buyer's guide; and [the preliminary
 information required by subsection (d) of this section, at or  prior  to
 the  time  an application is taken. When sales solicitations are made by
 mail, without the involvement of an agent or broker, each initial solic-
 itation must include a copy of the buyer's guide unless the  policy  for
 which  application is made provides for a period of at least thirty days
 within which the applicant may return the policy  for  an  unconditional
 refund  of  the  premiums paid, in which event the buyer's guide must be
 delivered with the policy or prior to delivery of the policy;  in  addi-
 tion,  such  solicitation  must  alert  the prospective purchaser of the
 right to receive, upon request, a buyer's guide  and  a  policy  summary
 prior to delivery of the policy; and]
   (B)  a policy summary [upon delivery of the policy], PROVIDED THAT THE
 POLICYHOLDER MAY RETURN THE POLICY FOR AN UNCONDITIONAL  REFUND  OF  THE
 PREMIUMS  PAID WITHIN THE PERIOD OF TIME PROVIDED UNDER PARAGRAPH ELEVEN
 OF SUBSECTION (A) OF SECTION THREE THOUSAND TWO HUNDRED  THREE  OF  THIS
 ARTICLE  AND  PARAGRAPH THIRTEEN OF SUBSECTION (A) OF SECTION FOUR THOU-
 SAND TWO HUNDRED FORTY OF THIS CHAPTER.
   (2) No annuity contract or life insurance policy or  certificate  with
 an  equity  index  account  shall be delivered or issued for delivery in
 this state unless, [no later than at the  time  of  application]  AT  OR
 PRIOR  TO  DELIVERY  OF THE CONTRACT, the prospective purchaser has been
 provided with a disclosure statement containing the following:
   (A) a statement in bold type to  the  effect  that  the  equity  index
 account  provides  benefits  linked to an external equity index and does
 not participate directly in the equity market;
   (B) a statement identifying the equity index used in the equity  index
 formula,  together  with a description of any alternate index should the
 initial index no longer be publicly available;
   (C) a statement indicating whether  paid  dividends  are  included  in
 changes  in  the  equity  index, together with a description of how such
 dividends, or lack thereof, would  affect  the  changes  in  the  equity
 index;  the  statement  must  provide the average dividend rate over the
 lesser of ten years or the calculable life of the index;
   (D) a statement fully describing the equity index formula;
   (E) a statement explaining and illustrating the equity  index  formula
 including  any  features  of  the equity index formula subject to change
 after issuance of the contract, policy or certificate;
   (F) a statement identifying the initial  minimum  guaranteed  interest
 rate  for  the minimum accumulation value of an equity index account and
 any withdrawal charge;
   (G) a statement identifying the initial current and the minimum speci-
 fied participation rate, i.e., how much of the  increase  in  the  index
 will be used to calculate the indexed linked interest rate, if any;
   (H)  a statement identifying the initial current and the minimum upper
 limit or cap on the indexed linked interest rate, if any;
   (I) for a  life  insurance  policy  crediting  additional  amounts  in
 accordance  with an equity index less frequently than annually, a state-
 ment to the effect that: if the policyholder requests a  full  surrender
 of  a policy prior to the expiration of the equity index crediting peri-
 od, no additional interest based on the equity index  will  be  credited

 S. 2077                             3
 
 and  that  only the guaranteed interest will be credited to the account;
 and the policyholder is advised  to  consider  alternatives  to  a  full
 surrender  of  the  policy  prior  to the expiration of the equity index
 crediting  period,  such  as  a  policy loan or, if available, a partial
 withdrawal of the policy; and
   (J) other disclosure information the superintendent deems appropriate.
   (c) Every insurer must provide, to any policyholder who so requests, a
 policy summary for each in-force  premium-paying  policy  for  which  no
 policy summary has ever been furnished. The insurer may charge the poli-
 cyholder  a  reasonable  fee for preparation of this summary, subject to
 guidelines specified in rules promulgated by the superintendent.
   (d) [The preliminary information shall be in writing and  include,  to
 the extent applicable, the following:
   (1)  the  name  and address of the insurance agent or broker or, if no
 agent or broker is involved, a statement of the procedure to be followed
 in order to receive responses to inquiries  concerning  the  preliminary
 information;
   (2)  the full name and home office, administrative office or branch or
 agency office address of the company in whose name  the  life  insurance
 policy is to be written;
   (3)  the date of the preliminary information and the generic name, the
 initial amount of insurance and the initial annual premium for the basic
 policy;
   (4) the total guaranteed cash surrender values for the  basic  policy,
 at  the end of the tenth and twentieth policy years or at the end of the
 premium-paying period if earlier. These values may be  shown  on  a  per
 thousand or per unit basis;
   (5)  the effective policy loan annual percentage interest rate, if the
 policy would contain this provision, and whether this rate is applied in
 advance or in arrears, adjustable or fixed;
   (6) for the life insurance policies  described  in  paragraph  one  of
 subsection  (n)  of  this  section,  life insurance cost indexes and the
 equivalent level annual dividend for the basic policy for ten and twenty
 years, but in no case beyond the premium-paying period;
   (7) in addition, the applicant shall be advised that, when the  policy
 is  issued, a complete policy summary, including cost data, based on the
 benefits, premiums and dividends  of  the  policy  as  issued,  will  be
 furnished;  and  that,  following  the  receipt of the policy and policy
 summary, there will be a period of not less than ten days  within  which
 the  applicant  may return the policy for an unconditional refund of the
 premiums paid; and
   (8) notwithstanding the foregoing, no  applicant  for  life  insurance
 shall  be  prevented or delayed in effecting or applying for coverage by
 the requirements of this section. In such cases where prior to  applica-
 tion  it is impractical to provide any items prescribed by this section,
 such items may be estimated in good faith or furnished as soon thereaft-
 er as practical prior to delivery of policy.
   (e)] A policy summary shall include the following:
   (1) a prominently placed title as follows:
   "STATEMENT OF POLICY COST AND BENEFIT INFORMATION";
   (2) the name and address of the insurance agent or broker, or,  if  no
 agent or broker is involved, a statement of the procedure to be followed
 in order to receive responses to inquiries regarding the policy summary;
   (3)  the full name and home office, administrative office or branch or
 agency office address of the company in whose name  the  life  insurance
 policy is to be or has been written;

 S. 2077                             4

   (4) the generic name of the basic policy and each rider;
   (5)  [for  the  life  insurance policies described in paragraph one of
 subsection (n) of this section,] the following amounts,  where  applica-
 ble,  for  the  first  five policy years and representative policy years
 thereafter sufficient to clearly  illustrate  the  premium  and  benefit
 patterns,  including the years for which life insurance cost indexes are
 displayed and at least one age from sixty through sixty-five or  maturi-
 ty, whichever is earlier:
   (A) the annual premium for the basic policy;
   (B) the annual premium for each optional rider;
   (C) guaranteed amount payable upon death at the beginning of the poli-
 cy  year  regardless  of the cause of death, other than suicide or other
 specifically enumerated exclusions, which is provided by the basic poli-
 cy and each optional rider, with benefits provided under the basic poli-
 cy and each rider shown separately;
   (D) total guaranteed cash surrender values at the end of the year with
 values shown separately for the basic policy and each rider;
   (E) cash dividends payable at the end of the year  with  values  shown
 separately  for  the  basic policy and each rider. Dividends need not be
 displayed beyond the twentieth policy year; and
   (F) guaranteed endowment amounts payable under the  policy  which  are
 not included in guaranteed cash surrender values above;
   (6)  the  effective policy loan annual percentage interest rate if the
 policy contains this provision, specifying whether this rate is  applied
 in  advance or in arrears. If the policy provides for an adjustable loan
 interest rate, the policy summary shall so state, shall  set  forth  the
 frequency  at  which  the  rate is to be determined for that policy, and
 shall describe the index upon which the maximum rate  is  based  at  the
 time the policy is issued;
   (7)  [for  the  life  insurance policies described in paragraph one of
 subsection (n) of this section:] (A) life insurance cost indexes for ten
 and twenty years but in no case beyond the premium-paying period.  Sepa-
 rate  indexes  are  to  be  displayed  for the basic policy and for each
 optional term life insurance rider.  Such indexes need not  be  included
 for  optional  riders  which  are limited to benefits such as accidental
 death benefits, disability waiver  of  premium,  preliminary  term  life
 insurance coverage of less than twelve months and guaranteed insurabili-
 ty  benefits,  nor  for  basic policies or optional riders covering more
 than one life;
   (B) the equivalent level annual dividend, in the case of participating
 policies and participating optional term life  insurance  riders,  under
 the  same  circumstances and for the same durations at which life insur-
 ance cost indexes are displayed;
   (8) a policy summary which includes dividends  shall  also  include  a
 statement  that  dividends  are  based on the company's current dividend
 scale and are not guaranteed; in addition, the summary shall[,  for  the
 life  insurance policies described in paragraph one of subsection (n) of
 this section,] include a statement in close proximity to the  equivalent
 level annual dividend as follows: "An explanation of the intended use of
 the equivalent level annual dividend is included in the buyer's guide";
   (9)  a statement in close proximity to the life insurance cost indexes
 as follows:
   "AN EXPLANATION OF THE INTENDED USE OF THESE INDEXES  IS  PROVIDED  IN
 THE BUYER'S GUIDE"; and
   (10) the date on which the policy summary is prepared.

 S. 2077                             5
 
   [(f)] (E) The policy summary must be a separate document. All informa-
 tion required to be disclosed must be set out in such a manner as not to
 minimize or render any portion thereof obscure. Any amounts which remain
 level for two or more years of the policy may be represented by a single
 number  if  it is clearly indicated what amounts are applicable for each
 policy year. Amounts in paragraph five of subsection [(e)] (D)  of  this
 section  shall  be  listed  in  total, not on a per thousand or per unit
 basis. If more than one insured is covered under one  policy  or  rider,
 guaranteed death benefits shall be displayed separately for each insured
 or for each class of insureds if death benefits do not differ within the
 class.    Zero  amounts  shall  be  displayed  as  zero and shall not be
 displayed as a blank space.
   [(g)] (F) Every insurer shall maintain, at its home office or  princi-
 pal  office,  a complete file containing one copy of each policy summary
 form authorized by the insurer for use pursuant to this section.
   [(h)] (G) An agent or broker shall  inform  a  prospective  purchaser,
 prior  to  commencing  a  life  insurance sales presentation, that he is
 acting as a life insurance agent or broker, and inform  the  prospective
 purchaser  of  the full name of the insurer which he is representing. In
 sale situations in which an agent or broker is not involved, the insurer
 shall identify its full name.
   [(i)] (H) As used in this section, "buyer's guide"  means  a  separate
 document  published  and  disseminated by insurers. The language therein
 shall be promulgated by the superintendent, and  shall,  to  the  extent
 practicable  and in the public interest as determined by the superinten-
 dent, be consistent with the  latest  version  of  a  buyer's  guide  as
 adopted by the national association of insurance commissioners.
   [(j)]  (I)  For  life  insurance  policies, except term life insurance
 policies, which are to be issued to qualify for  special  tax  treatment
 under  subsection  (b)  of  section  four  hundred three of the Internal
 Revenue Code of 1986, as amended, a written notice shall be delivered to
 the proposed insured in a manner satisfactory to the  superintendent  at
 or  prior to the time an application is taken and shall read as follows:
 "The purchase of a life insurance policy with cash value,  which  quali-
 fies  for  special  tax  treatment  under section 403(b) of the Internal
 Revenue Code of 1986, as amended, may not be appropriate for individuals
 seeking to maximize the accumulation of  funds  for  retirement  or  for
 individuals  seeking  life  insurance  coverage  primarily  to provide a
 survivorship benefit for the spouse in  the  event  of  death  prior  to
 retirement.  If  an  individual needs coverage to continue after retire-
 ment, current tax laws require the commencement of taxable distributions
 under the tax sheltered annuity plan (TSA) no later than age seventy and
 one-half which may necessitate some adjustment in the  cash  value  life
 insurance  policy  or  may result in increased insurance costs in future
 policy years. You should consult with your tax advisor before purchasing
 life insurance with cash value  as  part  of  a  tax  sheltered  annuity
 (TSA)."
   [(k)]  (J)  The  superintendent  shall  promulgate  by  regulation the
 contents [and], allowable format [of the  preliminary  information]  and
 [the]  information  to  appear in the policy summary. The superintendent
 shall also promulgate by regulation  standards  governing  the  content,
 format  and  use  of illustrations of individual life insurance policies
 and certain group life insurance policies and certificates, life  insur-
 ance policies subject to section four thousand two hundred thirty-two of
 this  chapter,  variable  life  insurance policies under which the death
 benefits and cash values vary in accordance  with  the  unit  values  of

 S. 2077                             6
 
 investments  held  in a separate account and individual annuities, indi-
 vidual  funding  agreements,  variable  annuities,  and  group   annuity
 contracts  if  any  certificate  is  issued  to  which  paragraph two of
 subsection (b) of section four thousand two hundred twenty-three of this
 chapter applies. The illustration regulation shall be consistent, to the
 greatest  extent practicable and in the public interest as determined by
 the superintendent, with the illustration regulations as adopted by  the
 national  association  of insurance commissioners. The superintendent in
 developing regulations to govern the content and format of the [prelimi-
 nary information,] policy summary and illustrations  shall  ensure  that
 such  forms  are  presented  in  an  easy, concise and meaningful way to
 enable consumers to understand the operation of the policy or contract.
   [(l)] (K) An insurer of any life insurance policy or annuity  contract
 subject  to  this  section  shall  notify the superintendent whether its
 policies or contract forms have been or will be marketed with or without
 an illustration. For those  policies  and  contracts  marketed  with  an
 illustration which complies with the regulations promulgated pursuant to
 subsection  [(k)]  (J)  of this section, no [preliminary information or]
 policy summary shall be required.  For  those  policies  which  are  not
 marketed  with an illustration, the [preliminary information and] policy
 summary shall be provided pursuant to the provisions of this section.
   [(m)] (L) The  superintendent,  by  regulation,  shall  determine  the
 applicability  of  the  illustration  regulation promulgated pursuant to
 subsection [(k)] (J) of this section to group  life  insurance  policies
 and  group annuities and funding agreements. Such determination shall be
 consistent, to the greatest extent practicable and in the public  inter-
 est,  with the illustration regulations as adopted by the national asso-
 ciation of insurance commissioners.
   [(n) The effective dates of this section as  applied  to  policies  of
 life  insurance,  annuity  contracts, and funding agreements shall be as
 follows:
   (1) for individual life insurance policies, certain group life  insur-
 ance  policies  and  certificates and life insurance policies subject to
 section four thousand two hundred thirty-two of  this  chapter,  January
 first, nineteen hundred ninety-eight;
   (2)  for annuities and funding agreements, the date of promulgation of
 regulations by the superintendent pursuant to  subsection  (k)  of  this
 section but not later than June thirty, nineteen hundred ninety-eight;
   (3)  for  variable life insurance policies and variable annuities, the
 date of promulgation of regulations by the superintendent but not  later
 than January first, nineteen hundred ninety-nine.
   No  less  than  three  months  prior  to  promulgating the regulations
 required to implement subsection (k) of this section pursuant  to  para-
 graphs  two  and three of this subsection, the superintendent shall hold
 public hearings on such regulations.]
   § 2. Paragraph 3 of subsection (a) of section 2123  of  the  insurance
 law,  as  amended by section 37-a of part D of chapter 56 of the laws of
 2013, is amended and a new paragraph 4 is added to read as follows:
   (3) Any replacement of individual life insurance policies or  individ-
 ual  annuity  contracts of an insurer by an agent, representative of the
 same or different insurer or broker shall conform to  standards  promul-
 gated by regulation by the superintendent. Such regulation shall:
   (A) specify what constitutes the replacement of a life insurance poli-
 cy or annuity contract and the proper disclosure and notification proce-
 dures to replace a policy or contract;

 S. 2077                             7
 
   (B)  require  notification  of the proposed replacement to the insurer
 whose policies or contracts are intended to be replaced;
   (C)  IN  THE CASE OF AN APPLICATION THAT IS INITIATED AS A RESULT OF A
 DIRECT RESPONSE SOLICITATION, INCLUDE PROVISIONS RELATING TO THE  DUTIES
 OF  INSURERS  WITH  RESPECT  TO  DIRECT  RESPONSE SOLICITATIONS THAT ARE
 CONSISTENT WITH THE LIFE INSURANCE AND ANNUITIES REPLACEMENT  REGULATION
 AS ADOPTED BY THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS;
   (D)  require  the timely exchange of illustrative and cost information
 required by section three thousand two hundred nine of this chapter  and
 necessary  for  completion  of a comparison of the proposed and replaced
 coverage; and
   [(D)] (E) provide for a sixty-day period  following  issuance  of  the
 replacement  policies  or  contracts during which the policy or contract
 owner may return the policies or contracts and  reinstate  the  replaced
 policies or contracts.
   (4)  FOR  PURPOSES  OF  PARAGRAPH  THREE  OF  THIS SUBSECTION, "DIRECT
 RESPONSE SOLICITATION" MEANS A  SOLICITATION  THROUGH  A  SPONSORING  OR
 ENDORSING  ENTITY  OR INDIVIDUAL SOLELY THROUGH THE MAIL, TELEPHONE, THE
 INTERNET OR OTHER MASS COMMUNICATION MEDIA.
   § 3. Paragraph 6 of subsection (a) of section 4226  of  the  insurance
 law,  as  added  by chapter 616 of the laws of 1997 is amended and a new
 subsection (e) is added to read as follows:
   (6) replace the individual life insurance policies or individual annu-
 ity contracts of an insurer by the same  or  different  insurer  without
 conforming to the standards promulgated by regulation by the superinten-
 dent. Such regulation shall:
   (A) specify what constitutes the replacement of a life insurance poli-
 cy or annuity contract and the proper disclosure and notification proce-
 dures to replace a policy or contract;
   (B)  require  notification  of the proposed replacement to the insurer
 whose policies or contracts are intended to be replaced;
   (C) IN THE CASE OF AN APPLICATION THAT IS INITIATED AS A RESULT  OF  A
 DIRECT  RESPONSE SOLICITATION, INCLUDE PROVISIONS RELATING TO THE DUTIES
 OF INSURERS WITH RESPECT  TO  DIRECT  RESPONSE  SOLICITATIONS  THAT  ARE
 CONSISTENT  WITH THE LIFE INSURANCE AND ANNUITIES REPLACEMENT REGULATION
 AS ADOPTED BY THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS;
   (D) require the timely exchange of illustrative and  cost  information
 required  by section three thousand two hundred nine of this chapter and
 necessary for completion of a comparison of the  proposed  and  replaced
 coverage; and
   [(D)]  (E)  provide  for  a sixty-day period following issuance of the
 replacement policies or contracts during which the  policy  or  contract
 owner  may  return  the policies or contracts and reinstate the replaced
 policies or contracts.
   (E) FOR PURPOSES OF PARAGRAPH SIX OF SUBSECTION (A) OF  THIS  SECTION,
 "DIRECT RESPONSE SOLICITATION" MEANS A SOLICITATION THROUGH A SPONSORING
 OR  ENDORSING  ENTITY  OR INDIVIDUAL SOLELY THROUGH THE MAIL, TELEPHONE,
 THE INTERNET OR OTHER MASS COMMUNICATION MEDIA.
   § 4. This act shall take effect immediately.