NY State Senate Bill 2015-S1170

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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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 06, 2016	referred to insurance
Jan 09, 2015	referred to insurance

2015-S1170 (ACTIVE) - Details

See Assembly Version of this Bill:: A702
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
2017-2018: S708, A2655
2019-2020: S3502
2021-2022: S4041
2023-2024: S2817
2025-2026: S5238

2015-S1170 (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.

2015-S1170 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S1170

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. Often-times, 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.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

2015-S1170 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1170

                       2015-2016 Regular Sessions

                            I N  S E N A T E

                             January 9, 2015
                               ___________

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. S 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.
                                                           LBD04401-01-5

S. 1170                             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.
  S  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. 1170                             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.
  S 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 S1170

Sponsored By

Archive: Last Bill Status - In Senate Committee Insurance Committee

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2015-S1170 (ACTIVE) - Details

2015-S1170 (ACTIVE) - Summary

2015-S1170 (ACTIVE) - Sponsor Memo

2015-S1170 (ACTIVE) - Bill Text download pdf

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Sponsored By

James L. Seward

Archive: Last Bill Status - In Senate Committee Insurance Committee

Actions

2015-S1170 (ACTIVE) - Details

2015-S1170 (ACTIVE) - Summary

2015-S1170 (ACTIVE) - Sponsor Memo

2015-S1170 (ACTIVE) - Bill Text download pdf

Comments