On Wednesday, Howard Kronberg of Keidel, Weldon, and Cunningham presented oral arguments on appeal of our ongoing challenge to the best interest regulation for life insurance and annuities (Regulation 187). Our key argument for overturning the regulation is that it is unconstitutionally vague. Specifically, the regulation compels speech by the agent or broker (i.e. making a specific product recommendation), yet fails to provide concrete guidance on how specifically to comply with the law. The regulation holds that the producer must act in the “best interest of the customer” but is silent on what is sufficient to demonstrate they acted in the customer’s best interest, nor even who the “customer” ultimately is, since the purchaser of a life insurance policy does not collect the benefits.
Counsel for Big I NY provided specific examples of how other DFS regulations include specific compliance criteria. The current best interest regulation is impossible for producers to meaningfully comply with, and is thus unconstitutionally vague.
“The 30,000 foot view of this is, what required a scalpel, the Department used a sledgehammer,” concluded Kronberg.
The court is expected to issue a ruling within 120 days. A recording of the arguments will be available early next week.