There may soon be some significant changes to the regulation of life insurance premiums in New York.
The New York State Department of Financial Services (DFS) has proposed regulation requiring life insurers to inform the regulator at least 120 days in advance of what it describes as “an adverse change in non-guaranteed elements of an existing life insurance or annuity policy”.
The idea behind the regulation is to govern practices related to premium increases by giving DFS the opportunity to review increases before they are implemented. New York Insurance Law prohibits life insurers from changing non-guaranteed elements in a discriminatory way for members of the same class of policyholders. Only certain enumerated factors, which do not include profit, can be considered when seeking to change non-guaranteed elements.
“Under New York law, life insurers may only increase the cost of insurance on in-force policies when the experience justifies it and only in a way that is fair and equitable,” said Superintendent Vullo. “Many existing life insurance and annuity policies are owned by New York’s senior citizens who have dutifully paid premiums for years and can least afford increased costs to maintain insurance coverage. DFS will not stand by and provide life insurers free reign to implement unjustified cost of insurance increases on New Yorkers simply to boost profits.”
In its statement announcing the proposals, DFS highlighted that “certain life insurers” had moved to “significantly increase the cost of insurance on older life insurance policies” in a reaction to decreased profitability due to low interest rates. As such, DFS stated it had received many customer complaints and a review found that “some insurers have not been implementing these increases in accordance with DFS”.
In addition to notifying DFS, the proposed regulation requires life insurers to notify consumers at least 60 days prior to an adverse change in non-guaranteed elements of an in-force life insurance or annuity policy.
“Regulators should know ahead of time about any planned price increase so they can make sure it’s justified, and consumers should know so they’re prepared,” said Beth Finkel, AARP New York State Director. “Advance notice allows both regulators and consumers to take appropriate action. AARP fully supports this common sense consumer protection.”
The proposed regulation is subject to a 45 day public comment period following publication in the State Register on November 30, 2017.
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