But the regulation is a lightning rod for litigation. The Independent Insurance Agents and Brokers of .New York and the Professional Insurance Agents of New York have filed similar lawsuits against the rule. A title insurance group was victorious in a lower N.Y court, but DFS has vowed to appeal.
At the federal level, NAIFA was one of nearly 20 plaintiffs that successfully sued to overturn the DOL’s fiduciary rule, which was designed to increase securities brokers' standard of conduct when working with investors rolling over retirement funds into IRAs.
N.Y.’s regulation takes a more direct tact than the 1,000-page DOL rule, but is limited in scope to insurance agents’ and brokers’ standards of conduct on the sale of insurance and annuities products. Securities products are not included in the state regulation.
In its lawsuit, NAIFA-NYS is also arguing that the DFS overstepped its statutory limits by imposing fiduciary obligations on the insurance industry and because it will hurt consumers.
The threat that fiduciary regulation will reduce the products and services the financial services industry offers to consumers has been used repeatedly in industry arguments against tougher sales conduct rules, although statistics proving the allegation have been sparse.
“The war pitting financial services conglomerates against mom and pop just keeps getting uglier,” said Knut Rostad, president of the Institute for the Fiduciary Standard, a research-education group which works to further fiduciary principles in the financial services industry. “[The] next tact will be calling ‘best interest’ fake news.”