11 CRR-NY 224.4NY-CRR

11 CRR-NY 224.4
11 CRR-NY 224.4
224.4 Duties of insurers and producers with respect to sales transactions.
(a) In recommending a sales transaction to a consumer, the producer, or the insurer where no producer is involved, shall act in the best interest of the consumer.
(b) The producer, or insurer where no producer is involved, acts in the best interest of the consumer when:
(1) the producer’s or insurer’s recommendation to the consumer is based on an evaluation of the relevant suitability information of the consumer and reflects the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use under the circumstances then prevailing. Only the interests of the consumer shall be considered in making the recommendation. The producer’s receipt of compensation or other incentives permitted by the Insurance Law and the insurance regulations is permitted by this requirement provided that the amount of the compensation or the receipt of an incentive does not influence the recommendation;
(2) the sales transaction is suitable; and
(3) there is a reasonable basis to believe:
(i) the consumer has been reasonably informed of various features of the policy and potential consequences of the sales transaction, both favorable and unfavorable, such as the potential surrender period and surrender charge, any secondary guarantee period, equity-index features, availability of cash value, potential tax implications if the consumer sells, modifies, surrenders, lapses or annuitizes the policy, death benefit, mortality and expense fees, cost of insurance charges, investment advisory fees, policy exclusions or restrictions, potential charges for and features of riders, limitations on interest returns, guaranteed interest rates, insurance and investment components, market risk, any differences in features among fee-based and commission-based versions of the policy, and the manner in which the producer is compensated for the sale and servicing of the policy in accordance with Part 30 of this Title (Regulation 194) and Insurance Law section 2119;
(ii) the consumer would benefit from certain features of the policy, such as tax-deferred growth of any cash values, annuitization, or death or living benefit;
(iii) the particular policy as a whole, the underlying subaccounts to which funds are allocated at the time of the sales transaction, and riders and similar product enhancements, if any, are suitable for the particular consumer based on the consumer’s suitability information; and
(iv) in the case of a replacement of a policy, the replacement is suitable including taking into consideration whether:
(a) the consumer will incur a surrender charge, increased premium or fees, decreased coverage duration, decreased death benefit or income amount, adverse change in health rating, be subject to the commencement of a new surrender period, lose existing benefits (such as death, living or other contractual benefits), be subject to tax implications if the consumer surrenders or borrows from the policy, or be subject to increased fees, investment advisory fees, premium loads or charges for riders and similar product enhancements;
(b) the consumer would benefit from policy enhancements and improvements, such as a decreased premium or fees, increased coverage duration, increased death benefit or income amount; and
(c) the consumer has had another policy replacement, in particular, a replacement within the preceding 36 months.
(c) In making a recommendation, a producer, or an insurer where no producer is involved, may weigh multiple factors that are relevant to the best interests of the consumer including, but not limited to, the benefits provided by the policy, the price of the policy, the financial strength of the insurer, and other factors that differentiate products or insurers.
(d) Prior to the recommendation of a sales transaction, a producer, or an insurer where no producer is involved, shall make reasonable efforts to obtain the consumer’s suitability information.
(1) Except as provided under paragraph (2) of this subdivision, neither a producer nor an insurer shall have any obligation to a consumer under subdivisions (a) and (b) of this section or under section 224.6(a) of this Part related to any transaction if:
(i) no recommendation is made;
(ii) a recommendation was made and was later found to have been prepared based on materially inaccurate material information provided by the consumer;
(iii) a consumer refuses to provide relevant suitability information and the transaction is not recommended; or
(iv) a consumer decides to enter into a sales transaction that is not based on a recommendation of the insurer or the producer.
(2) An insurer’s effectuation of a sales transaction with respect to its policies subject to paragraph (1) of this subdivision shall be suitable based on all the information actually known to the insurer at the time of the sales transaction.
(f) A producer, or an insurer where no producer is involved, shall at the time of a recommendation:
(1) disclose to the consumer in a reasonable summary format all relevant suitability considerations and product information, both favorable and unfavorable, that provide the basis for any recommendations;
(2) document the basis for any recommendation made, subject to subdivisions (a) and (b) of this section and the facts and analysis to support that recommendation;
(3) document, if relevant, the consumer’s refusal to provide suitability information, if any; and
(4) document that a sales transaction is not recommended if a consumer decides to enter into a sales transaction that is not based on the producer’s or insurer’s recommendation.
(g) A producer shall not make a recommendation to a consumer to enter into a sales transaction unless the producer has a reasonable basis to believe that the consumer has the financial ability to meet the financial commitments under the policy.
(h) A producer shall not make a recommendation to a consumer to enter into a sales transaction about which the producer has inadequate knowledge.
(i) Neither a producer nor an insurer shall dissuade, or attempt to dissuade, a consumer from:
(1) truthfully responding to an insurer’s request for confirmation of suitability information;
(2) filing a complaint with the superintendent; or
(3) cooperating with the investigation of a complaint.
(j) A producer shall not use a title or designation of financial planner, financial advisor or similar title unless the producer is properly licensed or certified and actually provides securities or other non-insurance financial services. Although a producer may state or imply that a sales recommendation is a component of a financial plan, a producer shall not state or imply to the consumer that a recommendation to enter into a sales transaction is comprehensive financial planning, comprehensive financial advice, investment management or related services unless the producer has a specific certification or professional designation in that area.
(k) Any requirement applicable to a producer pursuant to this Part shall apply to every producer who materially participated in the making of a recommendation and received compensation as a result of the sales transaction, regardless of whether the producer has had any direct contact with the consumer, provided that product wholesaling or product support based on generic client information, or the provision of education or marketing material, does not constitute participating in the making of a recommendation.
(l) Nothing in this Part shall be construed to prohibit the payment to a producer of any type or amount of cash or non-cash compensation including pension and welfare benefits, and any other form of compensation that is otherwise permitted under the Insurance Law and the insurance regulations.
(m) A producer may limit the range of policies recommended to consumers based on a captive or affiliation agreement with a particular insurer, where the producer prominently discloses to each consumer in writing prior to a recommendation, in a form acceptable to the superintendent, the nature of the agreement and the circumstances under which the producer will and will not limit the recommendations. For example, without limitation, these circumstances may include where a producer primarily recommends policies of a particular insurer and secondarily recommends policies from one or more other insurers when:
(1) the primary insurer does not offer a policy that meets the consumer’s needs or objectives;
(2) the type of policy in the best interest of the consumer is not available from the primary insurer;
(3) the underwriting criteria of the primary insurer are not favorable for the consumer; or
(4) the offer made by the primary insurer is not acceptable to the consumer. The producer shall adhere to the conditions in the disclosure with each consumer. The disclosure is insufficient if it merely states that the producer may limit recommendations without specific disclosure of the extent to which recommendations are, in fact, limited.
11 CRR-NY 224.4
Current through May 31, 2021
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