Industry lobbyists don’t believe that N.Y. regulators will just accept the defeat laying down, given that N.Y. has some of the most stringent insurance regulations in the country. “Today’s New York appellate court decision is important, but it may not be the final step in the legal process, as the decision may be appealed to the New York Court of Appeals," said Jason Berkowitz, chief legal and regulatory affairs officer with the Insured Retirement Institute (IRI). "[IRI] continues to advocate for uniform adoption of the National Association of Insurance Commissioners’ best interest model regulation by all states to avoid a patchwork of conflicting standard-of-conduct regulations for annuity sales.”
The state’s Department of Financial Services said it is reviewing the decision. The department “continues to believe in the consumer protective notion that insurance agents and brokers must not put their own profits above the needs of the consumers who turn to them for advice,” said a spokeswoman for the department in a statement. “This is the heart of the regulation. We are reviewing the decision and will consider our appellate rights.”
The New York rule imposed a number of requirements on agents and insurance and annuity companies:
• It required a recommendation to be in the best interest of a consumer by furthering the consumer’s needs and objectives and that it be made “without regard to the financial or other interests of the producer, insurer or any other party.”
• It required the disclosure of all suitability considerations and product information that formed the basis of any recommendation.
• It permitted agents or advisors to make a recommendation only if they had a "reasonable basis to believe that the consumer can meet the financial obligations under the policy."
• It prohibited an agent or broker from telling a consumer that a recommendation was part of their financial planning, investment advice or related services (unless the agent or broker was a certified professional in that area).
• It required insurers to "establish and maintain procedures to prevent financial exploitation and abuse."
The proposal did not apply to sales of mutual funds or other securities, unless these were related to annuity or life insurance products. Life insurance policies and contracts used to fund qualified retirement plans, ERISA plans and employer-sponsored IRAs were also exempted from the rule.