New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IX - Unfair Trade Practices
Part 224 - Suitability and Best Interests in Life Insurance and Annuity Transactions
Section 224.6 - Insurer responsibility and supervision

Universal Citation: 11 NY Comp Codes Rules and Regs ยง 224.6

Current through Register Vol. 46, No. 39, September 25, 2024

(a) In addition to the requirements of subdivisions (a) and (b) of section 224.4 of this Part and except as provided in subdivision (e) of section 224.4 of this Part, an insurer shall not effectuate a sales transaction with respect to its policies unless there is a reasonable basis to believe that the sales transaction is suitable based on the suitability information provided by the consumer and without regard to the availability of products, services, and transactions of companies other than the insurer. This subdivision (a) shall not apply to a sales transaction that results from the exercise of a contractual right in a policy.

(b)

(1) An insurer shall establish, maintain, and audit a system of supervision that is reasonably designed to achieve the insurer's and producers' compliance with subdivisions (a) through (k) of section 224.4 of this Part, including standards and procedures for:
(i) the collection of a consumer's suitability information with respect to sales transactions involving the insurer's policies;

(ii) the documentation and disclosure of the basis for any recommendation with respect to sales transactions involving the insurer's policies;

(iii) the review of complaints received by the insurer regarding recommendations inconsistent with the best interest of the consumer;

(iv) the auditing and/or contemporaneous review of recommendations to monitor producers' compliance with subdivisions (a) and (b) of section 224.4 of this Part with respect to the insurer's policies. An insurer may use a reasonable risk-based approach to audit and/or contemporaneously review producers' recommendations to identify recommendations of the greatest risk of violation of subdivisions (a) and (b) of section 224.4 of this Part so long as the approach does not focus solely on recommendations posing the greatest risk with no auditing or review of other recommendations.

(2) With respect to a sales transaction that results from the exercise of a contractual right in a policy, an insurer may comply with subparagraphs (b)(1)(i) and/or (b)(1)(ii) of this section by relying on a written certification of compliance with subparagraphs (b)(1)(i) and/or (b)(1)(ii) provided by the producer.

(c) An insurer may contract with a third party to establish and maintain a system of supervision for recommendations of sales transactions involving the insurer's policies.

(d)

(1) An insurer may maintain within and across product lines variations in compensation or other incentives that comply with the Insurance Law and the Insurance Regulations provided that the insurer's compensation and incentive practices, when taken as a whole, are designed to avoid recommendations by producers that are not in the best interest of consumers.

(2) A difference in compensation and incentives based solely on the amount of premium paid among policies shall not be deemed to violate paragraph (1) of this subdivision.

(e) An insurer shall be responsible for ensuring that every producer recommending any transaction with respect to the insurer's policies is adequately trained to make the recommendation in accordance with the provisions of this Part, but an insurer shall not be required to warrant that a producer is acting in the consumer's best interest.

(f) An insurer shall establish and maintain procedures designed to prevent financial exploitation and abuse. For purposes of this subdivision, "financial exploitation and abuse" means improper use of an adult's funds, property or resources by another individual, including fraud, false pretenses, embezzlement, conspiracy, forgery, falsifying records, coerced property transfers or denial of access to assets.

(g) An insurer of an in-force policy shall provide to a consumer all policy information reasonably requested by the consumer.

(h) Where a producer is authorized by an insurer to offer different versions of an insurer's product, one with a fee-based structure and one with a commission-based structure, an insurer shall provide to the consumer a comparison, in a form acceptable to the superintendent, showing the differences between the products. An insurer may also include additional information related to the differences in the producer's compensation structure for the different versions of the insurer's product.

(i) In the case of a proposed replacement:

(1) the replaced insurer shall provide to a producer all relevant policy information that is necessary for the evaluation of the replacement; and

(2) the replacing insurer shall provide policy information in accordance with Part 51 of this Title (Insurance Regulation 60), regardless of whether there exists any specific section for the inclusion of the information within the disclosure statement set forth in Appendices 10A and 10B of Part 51.

(j) The insurer shall take appropriate corrective action for any consumer harmed by a violation of this Part by the insurer, the producer, or any third party with whom the insurer contracts. In determining any penalty or other disciplinary action against an insurer, the superintendent may consider as mitigation any appropriate corrective action taken by the insurer, or whether the violation was part of a pattern or practice on the part of the insurer.

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