New York Life Insurance Compliance Lawyer & Attorney : Currin Law Office : Annuity Compliance & Insurance Regulation

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.  

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We are starting to get a significant number of questions regarding  the product design implications of the recent changes to the NY Insurance law with respect to group key person life insurance. 

Without going into a lot of detail on what has been a complicated problem for life insurers in this market,  the new law - which was effective immediately - now permits group corporate-owned life insurance, where the insurable interest is established based on "lawful and substantial economic interest."    COLI can now be written on a group basis in both the "true COLI" market where insurable interest is established by statute to permit funding of nondiscriminatory employee benefit plans as defined by ERISA, and in the "key person" market where the insureds are often highly compensated employees. 

The new law requires that the employer notify the proposed insured in writing of the intent to insure, and that the policy holder will be a beneficiary on the death of the insured.  The insured must consent in writing to the coverage. 

The ability to write these policies on a group basis affords much more flexibility in product design.  No where is that more significant than in policies offering private placement investment options.   When writing on a group basis is feasible, this legislative change offers new possibilities for policies with more restricted liquidity than is permitted on individual variable life products. 

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Today a new law goes into effect regarding viatical and life settlements in Iowa, and the Iowa Insurance Division has issued a bulletin providing a high level discussion of some of the major changes to IA law, with guidance on how the law will be implemented. 

Among other provisions, the new law bans newly defined stranger-initiated life insurance, or coverage initiated for the benefit of a third-party investor who has no insurable interest in the insured.  The law has fraud provisions and gives authority for the Division to conduct on-site examinations of viatical settlement brokers and providers. 

Annual reports from viatical providers are required by the law, the first being due March 1, 2009. 

The Division indicates that while they are reviewing their existing rules, those rules remain in effect unless in direct conflict with the new law. 

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