New York State Adopts Best Interest Standard for Insurance
The New York Department of Financial Services has adopted a state-level best interest standard that applies to various types of insurance as well as annuities, ThinkAdvisor writes.
The new regulation, which goes into effect Aug. 1, had been drafted as an amendment to an existing regulation on insurance, according to the publication. It applies to various insurance products, including group life policies, term life, life insurance and individual and group annuities, ThinkAdvisor writes. The new rule exempts pension risk transfer arrangements, corporate- and bank-owned life insurance arrangements, credit life insurance and life settlement transactions, according to the publication.
The department says it resisted adding more exemptions to avoid “a patchwork of standards and uncertainty among producers and consumers,” ThinkAdvisor writes.
The state opted to act on its own because of the rollback of federal-level financial regulations, Maria Vullo, New York superintendent of financial services, says in a statement cited by the publication.
Last month, an appeals court officially vacated the Department of Labor’s fiduciary rule, the Obama-era regulation that purported to require retirement account advisors to put clients’ interests first and went into partial effect a year ago.
According to ThinkAdvisor, the state standard is actually “tougher” than the DOL’s rule in some ways, such as in its inclusion of life insurance among the products covered by the state rule. The DOL didn’t explicitly apply its rule to life insurance, according to the publication.
Insurance commissioners in other states are also looking into developing their own standards of care. But earlier this week four industry groups representing insurers and banks slammed the very idea of a “best interest standard” as too vague and bound to cause confusion.
Meanwhile, the House of Representatives has passed two bills aimed at easing regulation of smaller financial advice firms, FA magazine writes. Sponsored by Rep. Gwen Moore, D-Wis., the Investment Adviser Regulatory Flexibility Improvement Act would require the SEC to redefine the term “small business” to reduce the regulatory burden on smaller companies, according to the publication.
And the Modernizing Disclosures for Investors Act, sponsored by Rep. Ann Wagner, R-Mo., would require the SEC to review the costs and benefits of investment advisors' Form Q-10 reporting requirements and to propose recommendations for lowering costs and increasing transparency and efficiency of reporting, FA magazine writes. The bills were passed as part of the larger package dubbed Jobs Act 3.0, according to the publication.