REG. 60

“The winter of our discontent” was how King Richard III described his plight in Shakespeare’s play of the same name. In fact the errant king was just reinterred in England after his miscreant bones were discovered. And what timing, near the end of the worst winter in memory. Who would have thought that potholes would grace the first cover of Spring. Springs, shocks, tires – all the losses are a legacy of poor road construction / drainage and patchwork filling at a fast pace. We elect officials to keep order, care for the public space and ensure safety. They of course assume their mandates to be much more abstract and hang their reputations largely on issues that generate votes, like gender, wealth disparity, race, and sociological aims. If only the Giuliani approach were to receive wider coinage, the cover might feature an a smooth road surface…. Yet, there is a fair road ahead on the regulatory front. Thanks to the New York Association of the National Association of Insurance and Financial Advisors (NAIFA-NYS) changes to Insurance Regulation 60, which pertains to the replacement of life insurance policies and annuity contracts, was adopted by the State Department of Financial Services (DFS) effective April 21. “Reg. 60” was implemented in 1998, and required a comparison of products before a sale could be transacted.

“Amendment 3 to Regulation 60,” which resulted from NAIFA-NYS’s efforts, was pushed hard by its President Lawrence J. Holzberg, LUTCF.

According to Mr. Holzberg, the association has long been on record in supporting the principles of Reg. 60, the main goals of which are transparency and an informed consumer. “In theory, Reg. 60 helped protect consumers from unnecessary or even fraudulent transfers of life insurance policies,” Holzberg stated. “However, instead of providing transparency or additional information for the consumer, in practice the regulation resulted in lengthy, unnecessary, and unproductive delays in the timely completion of transactions. It has had the unintended consequences of being harmful to consumers’ best interests.” Holzberg reports that earlier this year, NAIFA-NYS asked the Department to revise Reg. 60 to expedite the commencement of underwriting and allow an insurance producer to bind coverage (i.e., conditional receipt) even when a replacement is involved, while still maintaining the Disclosure Statement requirement. In filing the proposed amendment for public comment, the Department stated: “Amendment 3 changes the time in which a completed Disclosure Statement must be presented or delivered to an applicant from ‘no later than at the time the applicant signs the application’ to ‘prior to the delivery of the replacement policy,’ achieving the NAIFA-NYS’s stated goals and gaining the life insurance industry’s support while still retaining the current regulation’s significant consumer protections. In addition, this amendment will benefit insureds, insurance producers and insurers by:

• Allowing an insurance producer to bind coverage for a consumer more quickly, subject to an insurer’s underwriting requirements, because the insurance producer will be able to accept the consumer’s application immediately without waiting for a completed Disclosure Statement;
• Enabling the underwriting process to proceed immediately, thereby expediting the policy issuance process. Applicants who are determined to replace their existing coverage are, reportedly, oftentimes aggravated or upset that they must wait several weeks to apply for new coverage. Some applicants seek a quick exit from their cur- rent policies to avoid market losses (such as with variable annuities), but must wait several weeks before a new application can be completed;

Reducing the number of “revised” Disclosure Statements that are currently necessary to account for changes that occurred between the time the application was taken and the date that the policy is ultimately issued. The issuance of multiple disclosure statements can be confusing to policyholders, and this amendment is expected to dramatically reduce the number of instances where “revised” disclosure statements are necessary;

• Preserving the disclosure statement as a valuable tool for consumers to compare policies at the time of policy issuance and to review later on if they have questions about the new cover- age; and
• Making it easier for insurance producers and insurers to comply with the regulation. Moving the Disclosure Statement to the back-end of the process will streamline the process and eliminate many of the technical issues insurers encountered in the past.”

Congrats to Larry, his colleagues and legislative team and the NYS DFS and its Life Bureau for getting this done. The State Association’s Board of Directors, notably Immediate Past President, Robert Gruber of Buffalo, received kudos from all the par- ties involved. Larry Holzberg told us: “This reform of the regulation will bring positive and necessary changes pertaining to replacement contracts, which in turn will allow NAIFA members to better serve our clients’ interests safely and securely. This successful effort is an example of the work the NAIFA-NYS does on behalf of its members and the consuming public.” Here, here guys.[IA]