The New York Supreme Court, Appellate Division, has ruled that state Insurance Regulation 187, “Suitability and Best Interests in Life Insurance and Annuity Transactions,” is unconstitutional. A 2018 amendment to Regulation 187 imposed a complicated new standard of care on annuity recommendations and broadened the scope of the regulation to include life insurance as well as annuity products.
NAIFA’s New York chapter (NAIFA-NY) advocated against the amended regulation and then filed one of two legal challenges. The current decision is the result of a case brought by the Independent Insurance Agents and Brokers of New York. The Supreme Court decision references the NAIFA suit “seeking similar relief” and “on the same merits” several times.
The ruling is a win for insurance and financial advisors in New York, as well as the consumers who rely on them for products, services, and guidance. However, unlike at the national level and in many other states, the Supreme Court is not the highest court in New York, and the New York State Department of Financial Services could decide to appeal the decision to the Court of Appeals.
“The amendment to Regulation 187 created unintended consequences that placed unnecessary barriers between Main Street New Yorkers and the insurance and financial services professionals who serve them,” said NAIFA-NY State President Gary Cappon. “This ruling is a very encouraging sign, but NAIFA-NY will work with our industry allies as well as state regulators and legislators to protect New Yorkers’ ability to receive needed financial services and advice. We believe agents and advisors are necessary to help New Yorkers attain financial security and achieve their financial goals. Regulations must enhance those relationships, not hinder them.”
NAIFA-NY has an all new leadership team that took office earlier this year. They are committed to building coalitions and working with industry partners to amplify NAIFA-NY’s advocacy mission. A priority is ensuring that regulations protect consumers and require financial professionals to work in their best interests, while safeguarding the ability of Main Street consumers to obtain advice and allowing agents and advisors to continue with various business models that serve their clients well.
NAIFA supports the adoption in every state, including New York, of the National Association of Insurance Commissioners (NAIC) model regulation on annuity transactions. The NAIC model requires financial professionals to act in the best interests of consumers during annuity transactions and aligns with the Securities and Exchange Commission’s federal Regulation Best Interest.
“The court’s ruling on Regulation 187 gives New York a fantastic opportunity to make a fresh start and create a regulation to protect consumers based on the NAIC model,” Cappon said. “NAIFA-NY firmly believes that insurance and financial professionals must act in the best interests of their clients. It’s a requirement every NAIFA member subscribes to when they agree to abide by our association’s Code of Ethics. The NAIC model achieves this goal without the unworkable requirements and restrictions of Regulation 187.”
“NAIFA takes a comprehensive approach to public policy, advocating at federal, interstate, and state levels for laws and regulations that protect consumers and preserve the ability of insurance and financial professionals to serve their clients,” said NAIFA President-Elect Lawrence Holzberg, who is a NAIFA-NY member. “NAIFA advocacy also works at all three branches of government – the Legislative, Executive, and Judicial – at the federal level and in all 50 state capitals. For example, NAIFA partnered with the American Council of Life Insurers and other groups to bring legal action that eventually resulted in a federal court vacating the U.S. Department of Labor’s Fiduciary Rule.”