New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter IX - Unfair Trade Practices › Part 224 - Suitability and Best Interests in Life Insurance and Annuity Transactions › Section 224.4 - Duties of insurers and producers with respect to sales transactions

Current through Register Vol. 46, No. 28, July 10, 2024
(a) In recommending
				a sales transaction to a consumer, the producer, or the insurer where no
				producer is involved, shall act in the best interest of the consumer.
(b) The producer, or insurer where no
				producer is involved, acts in the best interest of the consumer when:
(1) the producer's or insurer's
				recommendation to the consumer is based on an evaluation of the relevant
				suitability information of the consumer and reflects the care, skill, prudence,
				and diligence that a prudent person acting in a like capacity and familiar with
				such matters would use under the circumstances then prevailing. Only the
				interests of the consumer shall be considered in making the recommendation. The
				producer's receipt of compensation or other incentives permitted by the
				Insurance Law and the insurance regulations is permitted by this requirement
				provided that the amount of the compensation or the receipt of an incentive
				does not influence the recommendation;
(2) the sales transaction is suitable;
				and
(3) there is a reasonable basis
				to believe:
(i) the consumer has been
				reasonably informed of various features of the policy and potential
				consequences of the sales transaction, both favorable and unfavorable, such as
				the potential surrender period and surrender charge, any secondary guarantee
				period, equity-index features, availability of cash value, potential tax
				implications if the consumer sells, modifies, surrenders, lapses or annuitizes
				the policy, death benefit, mortality and expense fees, cost of insurance
				charges, investment advisory fees, policy exclusions or restrictions, potential
				charges for and features of riders, limitations on interest returns, guaranteed
				interest rates, insurance and investment components, market risk, any
				differences in features among fee-based and commission-based versions of the
				policy, and the manner in which the producer is compensated for the sale and
				servicing of the policy in accordance with Part 30 of this Title (Regulation
				194) and Insurance Law section 2119;
(ii) the consumer would benefit from certain
				features of the policy, such as tax-deferred growth of any cash values,
				annuitization, or death or living benefit;
(iii) the particular policy as a whole, the
				underlying subaccounts to which funds are allocated at the time of the sales
				transaction, and riders and similar product enhancements, if any, are suitable
				for the particular consumer based on the consumer's suitability information;
				and
(iv) in the case of a
				replacement of a policy, the replacement is suitable including taking into
				consideration whether:
(a) the consumer will
				incur a surrender charge, increased premium or fees, decreased coverage
				duration, decreased death benefit or income amount, adverse change in health
				rating, be subject to the commencement of a new surrender period, lose existing
				benefits (such as death, living or other contractual benefits), be subject to
				tax implications if the consumer surrenders or borrows from the policy, or be
				subject to increased fees, investment advisory fees, premium loads or charges
				for riders and similar product enhancements;
(b) the consumer would benefit from policy
				enhancements and improvements, such as a decreased premium or fees, increased
				coverage duration, increased death benefit or income amount; and
(c) the consumer has had another policy
				replacement, in particular, a replacement within the preceding 36
				months.