NY State Senate Bill 2021-S4041

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
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Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 05, 2022	referred to insurance
Feb 01, 2021	referred to insurance

2021-S4041 (ACTIVE) - Details

See Assembly Version of this Bill:: A9688
Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Amd §§2123 & 4226, Ins L
Versions Introduced in Other Legislative Sessions:: 2011-2012: S5024
2013-2014: S3065
2015-2016: S1170
2017-2018: S708
2019-2020: S3502
2023-2024: S2817, A4434
2025-2026: S5238, A854

2021-S4041 (ACTIVE) - Summary

Relates to replacement of individual life insurance policies or annuity contracts; amends provisions relating to misrepresentations and misleading statements; requires replacements regulation be consistent with policies of the national association of insurance commissioners.

2021-S4041 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S4041

SPONSOR: BRESLIN
 
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 § 5 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 § 5 2123 and 4226 of the insurance law so as to contin-

ue 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 replace-
ment or 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 require-
ment 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 Regu-
lation 60 governing replacements of life insurance policies and annuity
contracts. Since its implementation in 1998, Regulation 60 has not prov-
en to work very well because, in some instances, it requires the compar-
ison 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 pas not always served the customer well. In some instances, they
have been unable to timely complete a transaction on an interest-sensi-
tive 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,ò 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 Oftentimes, these delays
are totally unnecessary because the customer is fully aware of the
details of their transaction and are 'anxious to complete their trans-
action.

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 inap-
propriate 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 NAIL 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 suitabil-
ity 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.3502 of 2019-20;

S.708 of 2017-18;

S.1170 of 2015-16;

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.

2021-S4041 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4041
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                             February 1, 2021
                                ___________
 
 Introduced  by  Sen. BRESLIN -- 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 maintenance 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. § 18031, to act as  a
 navigator,  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,  circu-
 lar,  statement  or  memorandum  misrepresenting  the terms, benefits or
 advantages of any policy or contract of life, accident or health  insur-
 ance,  any  annuity  contract  or  any  health  maintenance organization
 contract, delivered or issued for delivery or to be delivered or  issued
 for delivery, 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-
 tional amounts previously paid by any such insurer or health maintenance
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD07418-01-1

 S. 4041                             2
 
 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.
   § 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. 4041                             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.
   § 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 S4041

Sponsored By

Archive: Last Bill Status - In Senate Committee Insurance Committee

Actions

2021-S4041 (ACTIVE) - Details

2021-S4041 (ACTIVE) - Summary

2021-S4041 (ACTIVE) - Sponsor Memo

2021-S4041 (ACTIVE) - Bill Text download pdf

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Sponsored By

Neil D. Breslin

Archive: Last Bill Status - In Senate Committee Insurance Committee

Actions

2021-S4041 (ACTIVE) - Details

2021-S4041 (ACTIVE) - Summary

2021-S4041 (ACTIVE) - Sponsor Memo

2021-S4041 (ACTIVE) - Bill Text download pdf

Comments