New York Proposes “Best Interest Standard” to Life Insurance Model Regulations

The New York Department of Financial Services recently published a proposal to add a “best interest” standard to insurance regulations that imposes suitability requirements on annuity recommendations by producers and insurers in New York. The move comes soon after the National Association of Insurance Commissioners (NAIC) suitability working group issued its own proposed guidelines for best interest standards for the NAIC Model Suitability Regulation which seeks to create a national standard for insurance regulations.


The proposals would require that an annuity purchase and replacement recommendation not only be suitable but also be in the best interest of the consumer at the time the recommendation is made. The proposal defines “best interest” as “acting with reasonable diligence, care, skill and prudence in a manner that puts the interest of the consumer first and foremost” and does not necessarily mean the cheapest policy available.


Although the proposed NAIC models are only recommendations to state regulators overseeing their respective insurance markets, they are nonetheless important because many professional organizations rely on these private interest groups for guidance on how to conduct their business. New York is one of the majority of state that already have adopted laws requiring insurance producers to make “suitable” annuity purchase recommendations and require insurers to maintain supervision systems designed to ensure compliance with regulations.


The New York proposals apply to life insurance and annuity recommendations and could help safeguard consumers by ensuring their brokers offer plans that are in the best interest of the purchaser, not the financial interest of the seller. While most of us understand how vitally important it is to have insurance to protect our loved ones from financial burdens if we suddenly pass away, less of use can wrap our minds around how it actually works.


Life insurance and annuities should be a major consideration to retirement and estate planning goals to help individuals protect their familie and estates in case of an unexpected event. In the event someone passes away without life insurance, their whole estate could be compromised as their families try to make up for the loss of a provider. Even if the thought of planning for your retirement and estate seems daunting, the alternative to leaving your loved ones without financial support or a clear plan of who gets what from your estate can be far a worse alternative.

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