NY State Senate Bill 2017-S708

Archive: Last Bill Status - In Senate Committee Insurance Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 03, 2018	referred to insurance
Jan 04, 2017	referred to insurance

2017-S708 (ACTIVE) - Details

See Assembly Version of this Bill:: A2655
Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Amd §§2123 & 4226, Ins L
Versions Introduced in Other Legislative Sessions:: 2011-2012: S5024, A10537
2013-2014: S3065, A7494
2015-2016: S1170, A702
2019-2020: S3502
2021-2022: S4041
2023-2024: S2817

2017-S708 (ACTIVE) - Summary

Relates to replacement of individual life insurance policies or annuity contracts; amends provisions relating to misrepresentations and misleading statements; requires replacements regulations be consistent with policies of the national association of insurance commissioners.

2017-S708 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S708

 TITLE OF BILL :  An act to amend the insurance law, in relation to
the replacement of individual life insurance policies or individual
annuity contracts of any insurer

 PURPOSE :

The purpose of this bill is to amend §§ 2123 and 4226 of the insurance
law to establish that the regulation governing replacements of life
insurance policies or annuity contracts with another policy or
contract should be consistent, to the greatest extent practicable and
in the public interest, with the replacements regulation adopted by
the National Association of Insurance Commissioners (NAIC).

 SUMMARY OF PROVISIONS :

This bill amends §§ 2123 and 4226 of the insurance law so as to
continue to establish that insurers and producers are prohibited from
making misleading or incomplete representations of any policy or
contract for the purpose of inducing a customer to lapse, forfeit or
surrender a policy or contract. This bill further provides that the
superintendent of insurance/financial services shall establish rules
for the replacement of life insurance policies and annuity contracts
and that those rules shall be, to the greatest extent practicable and
in the public interest, consistent with the replacement regulation

adopted by the NAIC; as amended from time to time. This bill would
also amend both sections to remove the current requirement that the
replacement rules must contain a requirement that policies or
contracts being contemplated for replacement in New York can only be
completed after a complex, cost comparison of the replaced policy or
contract to the replacing policy or contract.

 JUSTIFICATION :

The bill makes amendments to sections 2123 & 4226 of the insurance law
to provide that the regulation governing replacements of life
insurance products in this state should be consistent with the NAIC
Life Insurance and Annuities Replacements Model Regulation and to
remove the requirement that there must be a detailed cost comparison
of products before you can replace one life insurance policy or
annuity with another one. These amendments leave in place the current
provision of law that prohibits insurers and producers from using a
misleading or incomplete representation to induce a customer to lapse,
forfeit or surrender a policy or contract.

The New York Insurance Department has used the existing provisions of
law as the basis for the implementation of the very complicated
Regulation 60 governing replacements of life insurance policies and
annuity contracts. Since its implementation in 1998, Regulation 60 has
not proven to work very well because, in some instances, it requires
the comparison of products that are not at all similar (such as a life
policy to a deposit-type annuity contract, or vice versa) and, in
every instance, results in a lengthy delay (sometimes up to a month)
in completion of the transaction. This delay is due to the fact that
the producer selling the new policy or contract and the customer
seeking to buy it must wait for the necessary information related to
the product being replaced, so that the producer can do the requisite
comparison. Pursuant to the current regulation, the information
related to the policy or contract to be replaced is supposed to be
provided by the company whose policy or contract is being contemplated
for replacement-something that they are not overly motivated, but are
compelled by the regulation, to do.

This delay has not always served the customer well. In some instances,
they have been unable to timely complete a transaction on an
interest-sensitive product and have, as a result, received a final
product with less favorable terms. During the recent economic
down-turn, consumers who were seeking to replace a variable annuity
product with a fixed one were forced to wait a month to consummate
that replacement, resulting in an even steeper decrease in the value
of their variable annuity before the transaction could be completed.
In other, less common instances, they may have had a change in their
health status or even passed away while waiting to purchase a policy
or contract with better terms than the policy or contract they were
seeking to replace. Oftentimes, these delays are totally unnecessary
because the customer is fully aware of the details of their
transaction and are anxious to complete their transaction.
New York is the only state in the nation that requires this level of
detailed comparison of one product to another. The vast majority of
the states have implemented a version of the NAIC Model on
Replacements, which requires insurers to provide simple disclosure of
factors that you should consider when replacing one life or annuity
product with another. This simple disclosure model has proven to be
sufficient to deter inappropriate replacements in other states.

If this bill were to be enacted, New York could amend their regulation
on replacements so that it is consistent with the NAIC Model
disclosure requirement and the practice in most other states. New York
law would continue to prohibit misrepresentations by producers or
insurers for the purpose of inducing the surrender of a policy or
contract, as well as providing for a sixty-day free look period after
the replacement of a policy or contract with a new one so that
customers having buyer's remorse could reverse their transaction. New
York would also continue to require life insurers and producers to
conduct a review and determination as to the suitability of every
annuity transaction, including replacement transaction, before an
annuity purchase is made (Regulation 187). All of these requirements
would ensure the proper balance so that New York consumers are being
protected from inappropriate sales, yet are still able to complete a
desired transaction in a timely fashion.

 LEGISLATIVE HISTORY :

S.1170 of 2015-16;
S.3065 of 2013-14;
S.5024 of 2011-12

 FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
This act will take effect on the 180th day after it shall have become
a law.

2017-S708 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    708
 
                        2017-2018 Regular Sessions
 
                             I N  S E N A T E
 
                              January 4, 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  the  replacement  of
   individual  life insurance policies or individual annuity contracts of
   any insurer

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  The  section  heading and subsections (a), (b) and (c) of
 section 2123 of the insurance law, subsection (a) as amended by  section
 37-a  of  part  D of chapter 56 of the laws of 2013, subsections (b) and
 (c) as amended by chapter 540 of the laws of 1996, are amended  to  read
 as follows:
   Misrepresentations[,]   AND   misleading  statements  [and  incomplete
 comparisons].
   (a) (1) No agent or representative of any insurer  or  health  mainte-
 nance  organization  authorized  to  transact  life,  accident or health
 insurance or health maintenance organization  business  in  this  state,
 insurance  broker,  person  who  has  received a grant from and has been
 certified by the health benefit exchange established pursuant to section
 1311 of the Affordable Care Act, 42 U.S.C. § 18031, to act as a  naviga-
 tor,  including  any  person employed by a certified navigator, or other
 person, firm, association or corporation, shall issue  or  circulate  or
 cause  or permit to be issued or circulated, any illustration, circular,
 statement or memorandum misrepresenting the terms,  benefits  or  advan-
 tages  of  any policy or contract of life, accident or health insurance,
 any annuity contract or any health  maintenance  organization  contract,
 delivered or issued for delivery or to be delivered or issued for deliv-
 ery,  in  this  state,  or  shall make any misleading estimate as to the
 dividends or share of surplus or additional amounts to  be  received  in
 the  future  on  such  policy  or  contract,  or shall make any false or
 misleading statement as to the dividends or share of  surplus  or  addi-
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD04757-01-7

 S. 708                              2
 
 tional amounts previously paid by any such insurer or health maintenance
 organization  on  similar  policies  or  contracts,  or  shall  make any
 misleading representation, or any misrepresentation, as to the financial
 condition  of any such insurer or health maintenance organization, or as
 to the legal reserve system upon which such insurer  or  health  mainte-
 nance organization operates.
   (2) No such person, firm, association or corporation shall make to any
 person  or  persons  any incomplete [comparison] OR MISLEADING REPRESEN-
 TATION of any such policies or contracts of any  insurer,  insurers,  or
 health maintenance organization, for the purpose of inducing, or tending
 to  induce,  such  person  or persons to lapse, forfeit or surrender any
 insurance policy or health maintenance organization contract.
   (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 BE
 CONSISTENT, TO THE GREATEST EXTENT PRACTICABLE AND IN THE PUBLIC  INTER-
 EST,  WITH  THE  REPLACEMENTS REGULATION ADOPTED BY THE NATIONAL ASSOCI-
 ATION OF INSURANCE COMMISSIONERS, AS AMENDED  FROM  TIME  TO  TIME,  AND
 SHALL ALSO:
   (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; AND
   (C) [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)] provide for a sixty-day period following issuance of the replace-
 ment policies or contracts during which the policy or contract owner may
 return  the policies or contracts and reinstate the replaced policies or
 contracts.
   (b) [Any comparison of the policies or contracts of any such  insurer,
 insurers  or  health  maintenance  organization shall be deemed to be an
 incomplete comparison if it does not conform to all the requirements for
 comparisons established by regulation.
   (c)] In the determination, judicial or otherwise, of  the  incomplete-
 ness or misleading character of any such [comparison] REPRESENTATION, it
 shall  not  be  presumed  that  the  insured knew or knows of any of the
 provisions, terms or benefits  contained  in  any  insurance  policy  or
 health maintenance organization contract.
   §  2.  The section heading and subsections (a), (b) and (c) of section
 4226 of the insurance law, paragraph 6 of subsection  (a)  as  added  by
 chapter 616 of the laws of 1997, are amended to read as follows:
   Misrepresentations[,]   AND   misleading  statements  [and  incomplete
 comparisons] by insurers. (a) No insurer authorized to do in this  state
 the business of life, or accident and health insurance, or to make annu-
 ity contracts shall:
   (1)  issue or circulate, or cause or permit to be issued or circulated
 on its behalf,  any  illustration,  circular,  statement  or  memorandum
 misrepresenting the terms, benefits or advantages of any of its policies
 or contracts;
   (2)  make  any  estimate of the dividends or share of surplus or addi-
 tional amounts to be received on such policies or contracts;

 S. 708                              3

   (3) make any false or misleading statement of the dividends  or  share
 of  surplus  or  additional  amounts paid by any such insurer on similar
 policies or contracts;
   (4)  make  any  misleading representation, or any misrepresentation of
 the financial condition of any such insurer  or  of  the  legal  reserve
 system upon which it operates; [or]
   (5)  make  or deliver to any person or persons any incomplete [compar-
 ison of] OR MISLEADING REPRESENTATION REGARDING  any  such  policies  or
 contracts for the purpose of inducing, or tending to induce, such person
 or  persons  to  lapse,  forfeit  or  surrender  any insurance policy or
 contract[.]; OR
   (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 BE CONSISTENT, TO THE GREATEST EXTENT PRAC-
 TICABLE AND IN THE PUBLIC INTEREST,  WITH  THE  REPLACEMENTS  REGULATION
 ADOPTED  BY  THE  NATIONAL  ASSOCIATION  OF  INSURANCE COMMISSIONERS, AS
 AMENDED FROM TIME TO TIME, AND SHALL ALSO:
   (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; AND
   (C)  [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)] provide for a sixty-day period following issuance of the replace-
 ment policies or contracts during which the policy or contract owner may
 return the policies or contracts and reinstate the replaced policies  or
 contracts.
   (b)  [Any  comparison of the policies or contracts of any such insurer
 or insurers shall be deemed to be an incomplete comparison  if  it  does
 not  conform  to all the requirements for comparisons established by the
 superintendent by regulation.
   (c)] In any determination, judicial or otherwise, of  the  incomplete-
 ness  or  misleading  character of any such [comparison or of] represen-
 tation, it shall not be presumed that the insured knew or knows  of  any
 of  the  provisions  or  benefits  contained  in any insurance policy or
 contract.
   § 3. This act shall take effect on the one hundred eightieth day after
 it shall have become a law.

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Senate Bill S708

Sponsored By

Archive: Last Bill Status - In Senate Committee Insurance Committee

2017-S708 (ACTIVE) - Details

2017-S708 (ACTIVE) - Summary

2017-S708 (ACTIVE) - Sponsor Memo

2017-S708 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S708

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Sponsored By

James L. Seward

Archive: Last Bill Status - In Senate Committee Insurance Committee

2017-S708 (ACTIVE) - Details

2017-S708 (ACTIVE) - Summary

2017-S708 (ACTIVE) - Sponsor Memo

2017-S708 (ACTIVE) - Bill Text download pdf

Comments