ALBANY, N.Y.—New York’s biggest and most influential insurance agent and broker associations announced today they have filed a lawsuit against the New York State Department of Financial Services (DFS) over amendments to NY Insurance Regulation 187, which would alter the agent/broker-customer relationship in the sale of life insurance and annuities, and ultimately harm consumers. Big I New York and the Professional Insurance Agents of New York State, who collectively represent thousands of insurance agents and brokers across New York State, are challenging the DFS on the basis that it acted beyond its authority when it adopted an amendment to Regulation 187, imposing a vague and subjective standard of care for insurance agents and brokers that is contrary to existing law.
The amendment, which is slated to take effect on August 1st 2019, would require agents and brokers to only consider the “best interest” of a customer in the sale of life insurance and annuities. Big I NY and PIANY assert that this standard changes the current law, as well as good business practices, which requires that insurance agents and brokers obtain the insurance coverage that is specifically requested by a customer, and act with honesty and trustworthiness in the process. Both Big I NY and PIANY note that this new standard is wildly subjective, and fails to instruct agents whose best interest they must consider, be it the applicant, insured, beneficiary, or owner of a policy – interests which are rarely, if ever perfectly aligned. In fact, Big I NY and PIANY contend, the new standard will not serve to protect consumers but instead will be detrimental to them.
“Life insurance is not a uniform, one-size-fits-all product and coverage recommendations should not be regulated. Restricting how an agent communicates with his or her client does a disservice to that client, and will potentially lead to less access for consumers” said PIANY President Jamie Ferris, CIC, AAI, CPIA. Mr. Ferris further remarked “In a highly competitive business environment, independent producers’ best marketing strength is their concern for their clients. Restricting open, honest discussion, driving out business, ultimately weakening the market will harm New York state’s insurance-buying public.”
The lawsuit identifies six separate legal grounds which challenge the amended regulation. Among the key contentions are: the DFS overstepped its authority; violated the State Administrative Procedures Act; created an unconstitutionally vague regulation; and acted in an arbitrary and capricious manner. During the amendment’s public comment period, both Big I NY and PIANY attempted to work in good faith with the DFS to create a balanced approach that would serve customers’ interests while protecting consumer access to the market.
“The DFS is failing one of its most important responsibilities: to ensure New York’s public has access to a healthy insurance market, with multiple products and options for customers’ coverage needs. This amendment will drive business out of the state and leave the insurance-buying public with reduced access to affordable coverage choices,” said Big I NY Board Chairman Louis Atti, CPCU. “That’s in nobody’s best interest.”
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Big I NY and PIANY are trade associations representing professional, independent insurance agencies, brokerages and their employees throughout New York State.
Read more on our Reg 187 Resource Page