Keep life insurance affordable and accessible in NY: OPINION
March 16, 2018 by Mary A. Griffin
When it comes to your personal financial safety net, there’s nothing more important than life insurance. Yet millions of Americans continue to lack sufficient coverage even though it’s more affordable and easier than ever to buy. Right now, only 44% of U.S. households have individual life insurance, a nearly a 50-year low. Unless important changes are made to a proposed regulation in New York, those numbers could drop even further.
The proposal by the state’s Department of Financial Services would require anyone selling life insurance and annuity products to apply a “best interest” standard to the sale. The good news is that the goal of the regulation is something we can all agree on. Life insurers should (and do) work in the best interest of their customers. The Life Insurance Council of New York supports a best-interest standard.
However, as currently written, the proposal could have unintended consequences that make it more difficult for middle-class New Yorkers to get the life insurance and retirement income products they need. That’s because the new rule would limit the advice professional advisers can provide to help people make informed decisions, and limit their options by making it harder for life insurers to do business in New York.
This issue is moving rapidly, but it’s important that taking a step forward doesn’t mean two steps back for New York’s families. Here are three ways the DFS can ensure its new rule truly works in the best interest of consumers.
Be deliberative. Imposing a major new regulation on the market is a considerable change that will require time. The federal Department of Labor fiduciary rule took nearly a decade to develop, and included multiple hearings. Part of the rule is still being reviewed. Experts at New York’s life insurance companies want to work with the department to make sure this rule helps, and doesn’t hinder, consumers.
Focus on uniformity. Life companies sell products nationally. When different states impose their own standards, complexity grows, new products are delayed, costs go up and options for New York consumers go down. In addition to the state’s effort, multiple federal bodies are also contemplating or enacting their own regulations on the sale of insurance products. Competing and overlapping rules will only hurt consumers.
Preserve options and information for consumers. Because the regulation affects life and annuity products but not other investment vehicles, it could create a scenario where sellers choose to sell financial products other than life insurance and annuities, like a mutual fund, which do not require both the buyer and seller to complete complex paperwork. In turn, this could reduce the likelihood that people will get the financial instrument that is truly in their “best interest” as a parent or caregiver. The new rule would also apply to people who already have policies in force, and limit the ability of advisers to offer suggestions on something as simple as a policy loan, because more complex paperwork would be required.
Helping consumers with important purchases is critically important. But Albany shouldn’t do that in a way that hurts the very people it intends to help. DFS should instead work with the industry so that new regulations benefit the consumer and preserve the ability of all New Yorkers to get the basic financial protection that life insurance provides.
Mary A. Griffin is president and CEO of the Life Insurance Council of New York.
