NYS Reg. 187 Training
On February 1, 2020, NYS Reg. 187 comes into effect for life insurance products. This regulation establishes a ‘best interests’ standard that agents are required to follow for new business and inforce transactions. Reg. 187 training can be completed for free using RegEd.
**Agents MUST send training certifications to email@example.com in addition to any directions instructed by carriers.**
Download RegEd Instructions Here:
Download NYS Reg. 187 Certification Instruction Forms by Carrier Here:
Please Note: Again, agents MUST send training certifications to firstname.lastname@example.org in addition to any directions instructed by carriers.
In July 2019, the New York Department of Financial Services (DFS) announced an amendment to New York Insurance Regulation 187 that affects annuities and life insurance sales. It requires insurers to establish new standards and procedures for how agents and brokers make insurance and annuity product recommendations.
By mandating that life insurance or annuity recommendations be based on the best interests of the communities, the rule is designed to keep financial compensation or incentives from influencing the recommendation made to a client. It requires insurers to develop, maintain, and manage procedures for preventing consumer financial exploitation. Basically, insurers must educate and supervise agents and brokers to ensure they are putting their clients’ needs above their own when they recommend life insurance and annuities products. Also, insurers should take note of the life insurance policies and annuity contracts issued in “New York State” language because it means that non-resident, as well as resident producers, are affected.
On February 1, 2020, New York will apply Regulation 187 to all life insurance sales in the state. Regulation 187 was finalized in 2018 and took effect Aug. 1 of this year for annuities. It sets a best-interest standard for annuity and life insurance sales. It also mandates enhanced disclosure and documentation, required of the producer and insurance carrier, as well as training programs.
Here is an example of a common scenario that may occur:
A producer has two life insurance products and they are identical from the consumer’s perspective: no differences in the benefits, the charges, the favorable and unfavorable features. Both are suitable and the consumer considers them equal products.
But from the producer’s perspective, the products are not identical, perhaps the compensation differs in some way between the two. The commission level could be higher with one carrier over another or one carrier may pay several months commission up front compared to paying as earned.
If the producer considers any of these compensation factors in his or her recommendation to the consumer, they fail to meet their obligation to act in the best interest of the consumer. Even though from the consumer’s perspective, they get the exact same product that they would have gotten had the other product been sold, so what this means from a compliance perspective is that documentation from the consumer-driven basis for the recommendation is essential, especially in any case where there is a higher or a differently compensated product.
Disclosures are huge in New York, and there are a lot of them. It is very important to talk the client through the product and cover all of the things that realistically could happen, consider that state regulators will be looking back retroactively and reconstructing the transaction via the documents that the agent provides.
It is important for producers to remember that a recommendation not to do something is also a recommendation that is covered by Reg. 187. The consumer has the right to reject the producer’s recommendation and go with a different product. They’re entitled to do that, but the agent is going to want to have clear documentation that they recommended against it and the carrier would want to see that as well. What was it about that product that led the producer to question why or not it was suitable?