Surprising Post-Approval Review Objection from NYSID
As we all know, post-approval reviews often reveal new and unexpected positions on the part of the New York State Insurance Department. However, some are just downright astonishing—especially when accompanied by a demand for a "corrective endorsement" for in-force policies.
If your company issues UL policies, you are advised to note the following objection: "Minimum loan amounts are not authorized by statute and are not permitted. Please provide a corrective endorsement." The Department does not say that there is a statutory PROHIBITION against a minimum loan amount. There is simply no specific authorization for a minimum loan amount on UL policies. The legislature did not address this issue at all and there is no NYSID regulation governing UL products.
The Department did, however, draft a regulation regarding VUL products and guess what? Minimum loans are expressly permitted. Section 54.6(b)(10)(vii) of regulation 77 states: "The policy may specify a reasonable minimum amount which may be borrowed at any time, but such minimum shall not apply to any automatic premium loan provision." Can a company really be faulted for thinking the same standard would apply to UL policies absent anything in a law or regulation to the contrary? The Department created that standard for VUL itself, wouldn't you rationally think it would apply to UL policies too?
And of course here we are talking about having to do a "corrective" endorsement? What is being corrected? The Department permits reasonable minimum loans on VUL, but having a minimum loan amount is so egregious a "violation of law, regulation, or circular letter" that a corrective endorsement must be provided to all in-force business. But what law; regulation or circular letter you might ask? The silent law, the silent regulation, the silent circular letter.
