IRI: NEW YORK DFS GUIDANCE SHOULD ELIMINATE MARKETPLACE CONFUSION

Posted on September 12, 2019

Effort Addresses Issue that Caused Reduction in Availability of  Some Fee-Based Annuities

WASHINGTON, D.C. -- The Insured Retirement Institute (IRI) said that guidance issued yesterday by the New York State Department of Financial Services (NYDFS) should eliminate uncertainty involving a disclosure provision affecting insurers and distributors of certain similar fee-based and commission-based annuities. 

“This is a textbook example of how constructive engagement between regulators and industry can reach workable solutions that meet mutual consumer protection objectives without impairing the marketplace from offering products to meet a wide variety of consumer needs,” said Chelsea Crucitti, IRI director, regulatory affairs.

NYDFS issued guidance to address concerns that a disclosure provision under the Department’s Regulation 187 affecting annuities had created confusion among insurance carriers and distributors that issued commission-based and fee-based versions of an annuity.

This situation arose where a producer is dually licensed as both an agent and a broker and may sometimes sell the commission-based version of the product and sometimes sell the fee-based version of the product for the same insurer.   The disclosure is not required where a producer only sells the fee-based version of the insurer’s product and not the commission-based version of the insurer’s product.   Similarly, the disclosure is not required where a producer only sells the commission-based version of the insurer’s product and not the fee-based version of the insurer’s product.    

The NYDFS bulletin also said that insurers do not need to suspend sales and insurers and producers will not be considered out of compliance while they are working in good faith to implement one of the disclosure options.

A number of insurers had stopped issuing certain fee-based annuities in New York due to uncertainty over disclosure requirements. Insurers that had stopped issuing products said that they had expected their actions to be temporary.

“We appreciate the effort by Deputy Superintendent James Regalbuto and the Department to listen to industry’s concerns and work toward a sound, reasonable solution that allows insurers to offer a full range of products that can help New Yorkers meet their retirement income needs,” Crucitti said. 

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