NY Ins L § 3206 (2021)
2021 New York Laws ISC - Insurance Article 32 - Insurance Contracts - Life, Accident and Health, Annuities 3206 - Policies Which Provide for an Adjustable Maximum Rate of Interest on Policy Loans.

§  3206.  Policies  which  provide  for  an adjustable maximum rate of interest on policy loans. (a) In this section:  (1) The term "policy" includes: (i) life insurance policies subject to the provisions of item (ii) of subparagraph (F) of  paragraph  eight  of subsection  (a)  of  section  three  thousand  two hundred three of this article, and  (ii)  annuity  contracts  subject  to  the  provisions  of subsection  (c)  of  section three thousand two hundred nineteen of this article, and (iii) certificates issued by a  fraternal  benefit  society subject  to the provisions of paragraph six of subsection (a) of section four thousand five  hundred  ten  of  this  chapter,  and  (iv)  annuity certificates  subject  to section four thousand five hundred thirteen of this chapter, when such policies, contracts, or certificates provide for loans with adjustable rates of interest.  (2) The term "policy loan" includes any cash  loans  and  any  premium loans made under a policy to pay one or more premiums that were not paid to the life insurer as they fell due.  (3)  The  term  "policyholder" includes the owner of the policy or the person designated to pay  premiums  as  shown  on  the  records  of  the insurer.  (4) The term "published monthly average" means:  (A)  the  Monthly  Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service Inc., or  any successor thereto; or  (B)  in  the  event  that the Moody's Corporate Bond Yield Averages -- Monthly Average Corporates  is  no  longer  published,  a  substantially similar average, established by regulation issued by the superintendent.  (b)  The  adjustable maximum rate of interest on policy loans for each policy will be determined at the  regular  intervals  specified  in  the policy. At the intervals specified in the policy:  (1)  the rate being charged may be increased whenever such increase as determined under subsection (c)  hereof  would  increase  that  rate  by one-half per centum or more per annum; and  (2)  the rate being charged must be reduced whenever such reduction as determined under subsection (c)  hereof  would  decrease  that  rate  by one-half per centum or more per annum.  (c)  The  rate  of interest charged on a policy loan made under such a policy shall not exceed the higher of the following:  (1) the published monthly average for the calendar  month  ending  two months before the date on which the rate is determined; or  (2)  the  rate  used  to  compute  the cash surrender values under the policy during the applicable period plus one per centum per annum.  (d) The insurer shall for any such policy:  (1) notify the policyholder at the time a cash loan  is  made  of  the initial rate of interest on the loan;  (2)  notify  the  policyholder  with  respect  to premium loans of the initial rate of interest on  the  loan  as  soon  as  it  is  reasonably practical  to  do  so  after making the initial loan. Notice need not be given to the policyholder when a further premium loan is  added,  except as provided in paragraph three hereof;  (3)  send to policyholders with loans reasonable advance notice of any increase in the rate; and  (4) include in  the  notices  required  above  the  substance  of  the pertinent  policy  provisions  permitting an adjustable maximum interest rate on policy loans established from time to time  by  the  insurer  as permitted  by  law,  and  specifying the frequency at which the interest rate is to be determined by the insurer as permitted by law.  (e) No policy shall terminate in a policy year as the sole  result  of change  in  the  interest  rate during that policy year, and the insurer  shall maintain coverage during that policy year until the time at  which it  would  otherwise  have terminated if there had been no change during that policy year.  (f) Participating policies issued under the provisions of this section shall constitute one or more dividend classifications, as established by the   board   of  directors  of  the  insurer,  separate  from  dividend classifications established for other participating policies  issued  by the insurer.  (g)  No provision of law regulating the maximum rate of interest which may be charged, taken or received, other than section 190.40 or  section 190.42  of  the  penal  law shall apply to any loan made pursuant to the provisions of this section.  (h) The provisions of this section shall not be made to apply  to  any policy issued before January first, nineteen hundred eighty-three unless the  policyholder  agrees  in  writing  to  the  applicability  of  such provisions. Any holder of a policy issued before January first, nineteen hundred eighty-three which is of  a  classification  determined  by  the insurer  as  eligible  may request the insurer to make the provisions of this section applicable to such policy; the superintendent  may  require justification of the eligibility standard determined by the insurer.