Insurance Department mulls more oversight
New York State insurance regulators are planning a series of four hearings, including one in Buffalo, to examine whether further oversight or regulation is needed over the sale of life insurance and annuity contracts.
The hearings are designed to gather information about life insurance and annuity sales transactions from the public, consumer groups, industry representatives, senior citizen organizations, academics and expert witnesses, and other interested parties, according to a press release from the state Insurance Department.
They will focus in particular on “suitability” — whether a product is the right one for someone. Regulators will seek insight as to whether there is a problem with inappropriate sales of life insurance and annuities in the state to people who shouldn’t be buying them.
The first hearing will be held in Buffalo on Aug. 6 at 10 a. m., in the Mason O. Damon Auditorium at the Buffalo and Erie County Public Library. It will be followed by additional hearings in Albany on Aug. 13, on Long Island on Sept. 9, and in New York City on Sept. 16.
“Consumers of all ages and seniors in particular need to know if the products they’re buying are right for them,” acting Superintendent of Insurance Kermitt Brooks said in the release. “So many new life insurance and annuity products have come onto the market and some are so complex, it may be hard for someone to figure out what the right product is and why.”
Anyone may testify or submit written comments. More information is available online at www.ins.state.ny.us , and testimony can be submitted or scheduled through the Web site. In addition, comments can be submitted by mail or by e-mail to publichearingscomments@ins.state.ny.us , using “Suitability Hearings” in the subject line. Comments will be accepted for up to 15 business days after the hearing, which will also be Webcast live. The announcement comes amid continued controversy over the sale of certain life insurance and annuity products, which have become increasingly complex transactions, the state noted in the release. A host of new products have been introduced, particularly in annuities, that are now being offered to consumers of all ages.
But critics, particularly consumer advocates, say such products are all too often sold to senior citizens and certain other individuals, when their features are inappropriate for those consumers’ financial needs.
In response, regulatory agencies nationwide, including in states such as Massachusetts, have launched numerous investigations into companies’ sales practices to determine if the companies and agents consider whether a product is suitable and only recommend those that make sense for someone’s specific needs. A number of companies have paid millions of dollars to settle allegations of improper sales practices.
The National Association of Insurance Commissioners has adopted a model regulation on suitability that has been implemented, in some form, by more than 30 states, and recently proposed a revision. But New York hasn’t adopted it, and doesn’t currently have any law or regulation banning unsuitable sales. The state mandates certain disclosures and comparisons, but assumes the consumer is the best judge.
So the hearings will look at whether New York should adopt a regulation based on the NAIC model, the revision or rules set by the Financial Industry Regulatory Authority, which regulates variable annuities. Regulators will also consider if any new rule should apply to all life insurance and annuity sales, or just a portion.
“We want to hear from everyone,” Brooks said. “Only by hearing from consumers, producers, companies and everyone else involved in the process can we fully understand what needs to be done.”
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