Today, Big I NY and PIANY took a decisive step to fight back against overreach by the Department of Financial Services and filed a legal challenge to the recently adopted amendment to Regulation 187. This amendment, which is of great concern to our members, would impose a vague standard of “best interest” on the sale of life insurance and annuities. The suit seeks to have the amendment voided in full.This new standard is extremely troubling and would significantly alter the agent/broker-customer relationship. The amended regulation would require agents and brokers to obtain detailed financial and risk information about their customers, and then recommend a specific policy based on that data—similar to the way financial investment products are offered. This would overturn decades of well-established case law which holds agents and brokers have no duty to recommend, and consequently significantly increase the risk of E&O lawsuits.Big I NY and PIANY believe the new standard is wildly subjective and fails to instruct agents/brokers whose best interest they must consider; be it the policyholder, beneficiary, or owner of a policy—interests which are rarely, if ever, perfectly aligned. The new standard will not protect consumers, but instead be detrimental by potentially driving business out of the state and leaving the insurance-buying public with reduced access to affordable coverage.While the amendment currently affects only life insurance and annuities, we have serious concerns that the Department could later expand the “best interest” standard to all insurance transactions. This would have serious consequences for every producer in the state.Big I NY and PIANY submitted extensive comments to the Department during the public comment period, but the final amendment remains unpalatable. Our two associations are committed to protecting New York’s entire insurance agent and broker community.The case will be heard by a judge in the Third Judicial Department of the Supreme Court.
We will keep you updated as the proceeding progresses.