NYSID issues Disclosure Rules for Indexed Products
The New York State Insurance Department recently issued "Equity index annuity contract or life insurance policy paid dividend disclosure under Section 3209(b)(2)(C)."
Section 3209(b)(2)(C) was amended in the last legislative session to require a disclosure statement "indicating whether paid dividends are included in changes in the equity index, together with a description of how such dividends, or lack thereof, would affect the changes in the equity index; the statement must provide the average dividend rate over the lesser of ten years or the calculable life of the index." The guidance issued is to assist in "calculating and communicating" the average dividend rate.
Several companies have posed questions to us over the last couple of months regarding the nature and timing of such disclosures. In addition to providing a sample of satisfactory disclosure, the guidance states that the communication is required "by the first of the month following the end of the latest completed calendar year (i.e., by February 1 the average dividend rate for the most recent 10 completed calendar years would be provided in the disclosure required by Section 3209(b)(2)(C))." Adding the required disclosure to these annual statements for indexed products (remember this applies to both life and annuity products) could take significant programming for some companies, so prompt attention to this guidance is strongly recommended.
Companies can be sure that the Department will be asking to see these disclosures during post-approval reviews, market conduct exams or upon receipt of a consumer complaint.
