NY Reg 187
What is NY Reg 187?
The New York (DFS) Department of Financial Services has expanded (Reg 187) Insurance Regulation 187 . This expansion will raise the suitability standards for both life insurance and annuity sales. The expansion includes things such as; transparency in customer disclosures and expanding obligations to act in the customer’s best interest, by requiring more accountability in sales for both insurers and producers. This applies to life insurance as well as annuity sales. Reg 187 applies to both new sales suggestions and in force policy transactions. Insurers are now also required to put internal procedures in place that will recognize and prevent financial exploitation of senior consumers.
This means; The Carrier and producer must put the client’s best interest before their sales commission. Therefore, compensation should not be driving factor when suggesting a product or recommending a transaction to a client.
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NY Reg 187: Suitability and Best Interests in Life Insurance and Annuity Transactions:
This regulation is in place to protect NY consumers. It exists to assure consumers that their insurance needs and financial objectives are a top priority during all sales transactions.
Reg 187 establishes standards of conduct for insurance producers and broker-dealers, as well as registered representatives licensed in New York to sell life insurance and annuity products. These standards require all licensed sales representatives to act in a trustworthy manner and to keep the consumer’s needs at the forefront.
NY Reg 187: What do you need to do to be compliant:
The regulation applies to licensees authorized to transact life insurance and/or annuity business. You must complete the required Reg 187 training within the following time frames:
- Annuity contract sales and in-force transactions starting on August 1, 2019
- Life insurance policy sales as well as in-force policy transactions starting on February 1, 2020
NY Reg 187: What does the training consist of:
1. Best Interest Standard clarifications
- You must consider only the consumer’s interest. Although, receiving compensation is not a violation of the standard.
- Agent compensation can vary as long as this does not affect your recommendations.
2. Two suitability standards
- Recommendations for a term life insurance product with no cash value
- Recommendations for any other type of policy
3. Two Standards for Insurer and Producer duties
- Is the recommendation for a sales transaction?
- Is the recommendation for an in-force transaction?
4. A new requirement has been added in the case that there are both fee-based and commission-based versions of a policy are available.
5. You must provide the client with a disclosure statement based on the suitability of products in relation to the availability to the producer.
6. Producers cannot use certain titles or designations such as; “financial planner” or “financial advisor” unless licensed or certified for their use.
7. There must also be recognition when a client exhibits diminished capacity so you will avoid financial exploitation of such individuals.
NY Reg 187: Who is responsible for the updated compliance:
Insurers. This includes fraternal benefit societies. These entities are obligated to establish both standards and procedures for policy recommendations for New York consumers. This means; transactions defined in the Regulation are in the best interest of the consumer. All transactions should appropriately address the insurance needs as well as the financial objectives of the consumer.
A.D. Banker & Company offers 3 courses for insurance CE credit:
- Life & Annuity Best Interests-Reg 187 (1-hour)
- NY Annuity and Life Insurance Suitability (4-hour)
- Life & Annuity Best Interests-Reg 187-Webinar (1-hour)
The Life & Annuity Best Interests webinar does not require a NY proctor or exam to count for CE credit.
There is another training option available on line; Reg 187 Best Interests. This course does not require a proctor and is a non-CE course. It includes a shorter assessment exam and is a good option for those who do not need CE credits. Once the courses are completed, you will receive a certificate.