The New York Department of Financial Services today issued a final rule adopting a “best interest” standard for insurers licensed to sell life insurance and annuity products. The regulation takes effect on Aug. 1, 2019 for annuity contracts, and takes effect for life insurance policy transactions six months later.
The rule directs sellers of these insurance products to act in the best interest of their customers when making recommendations or performing insurance sales transactions. Insurers will be required to establish standards and procedures to supervise recommendations made by brokers to consumers, as well as procedures that would prevent the financial exploitation of consumers.
The American Bankers Association has previously raised concerns about the adverse implications that duplicative and burdensome compliance requirements have on the banking industry. The association noted that that the NYDFS final rule could increase the compliance burden and litigation risk for the bank-insurance industry and ultimately limit choices for consumers.