Pretty Huge

One of the early actions taken by the Trump Administration calls for the Department of Labor (DOL) to halt implementation of the Obama Administration’s ridiculous fiduciary rule and to implement a complete re-review of the rule. Trade associations were quick to hail the halt and credit themselves—properly—for getting this in the crosshairs of the President. The rule tightens conflict of interest rules under the Employee Retirement Income Security Act (ERISA) and requires insurance agents and brokers who give guidance about certain retirement investments to adhere to a fiduciary standard of care.

The DOL rule was finalized in April 2016, but operation of the rule was delayed until April 2017 in order to give the industry time to comply. Robert A. Rusbuldt, Big “I” president & CEO, stated “The DOL rule places overly burdensome requirements on Big ‘I’ members who offer retirement advice, leaving many insurance agents and brokers struggling to find a way to effectively serve their clients moving forward. President Trump’s order has come just in time, as implementation of the rule is already resulting in less consumer choice for the middle class.” Another Big “I” voice added: “While the association does not necessarily oppose a best interest standard for insurance agents and brokers, the Obama Administration’s fiduciary rule is simply unworkable for many Big ‘I’ members and harmful to many consumers,” said Charles Symington, Big “I” senior vice president of external and government affairs. “The Big ‘I’ looks forward to working with the Trump Administration and Congress as the DOL reviews the next steps pursuant to the President’s executive order.” In New York the NYSAIFA was fast to hail the executive action as a vital change affecting the livelihood of its members. Trump has been one to keep his promise of reducing regulations…Dodd Frank is next, we hope…. Governor Andrew M. Cuomo has announced that the Department of Financial Services is taking action to “remind life insurance companies of their legal obligations when settling beneficiary claims.” The guidance issued by DFS today informs health insurers that they must make prompt payments to beneficiaries within the two-year period after a policyholder dies. Through examinations and targeted investigations, DFS has identified disturbing practices among some insurers, in connection with small face value life insurance policies marketed to low- and middle-income consumers for funeral, burial and other final expenses. The guidance issued follows a recent DFS enforcement action taken against an insurance company that improperly denied coverage and unilaterally rescinded life insurance policies for hundreds of deceased insured policyholders, leaving beneficiaries without payments due them.” Under New York Insurance Law, an insurance company may contest a life insurance claim made during the “two-year contestable period” only if the insurer establishes that there was a material misrepresentation on an application for life insurance to induce the insurer to issue the life insurance policy. Life insurers may not contest claims filed by beneficiaries within the two-year contestability period without actual evidence of misrepresentation, nor may they require beneficiaries to bear the burden of providing proof regarding an alleged misrepresentation simply because the covered policyholder dies within the two-year contestable period. If the insurer proves a material misrepresentation following an insured’s death, the insurer may obtain a rescission of the policy only in a court action or by agreement of all fully informed beneficiaries. The DFS investigation has found that some insurers have asserted a right to contest a life insurance claim based solely on the fact that a covered policyholder’s death occurred within two years of the policy’s date of issue. Some insurers also have asserted a unilateral right to rescind the life insurance policy after the covered policyholder’s death when the insurer is unable to obtain the deceased’s medical records. These insurers have improperly attempted to shift the burden of proof regarding misrepresentation to beneficiaries by requiring them to produce the medical records of the covered policyholder, and have unilaterally rescinded policies where beneficiaries have not provided requested medical documentation. DFS will continue to take action against insurers that are not in compliance with New York Insurance Law through regular examinations and targeted investigations. “A life insurance company cannot require a beneficiary to produce a deceased policyholder’s medical records to pursue an alleged misrepresentation investigation or use illegal and unfair tactics to withhold and deny claim payments when those payments are due and most needed upon the insured’s death,” said Superintendent Maria T. Vullo. “The unlawful practices identified in DFS’s examinations and investigations have deprived New Yorkers of their rights under their life insurance policies, drained the value of their policies, and unfairly denied insurance payments to their beneficiaries. DFS will hold all insurers accountable for making prompt, fair and equitable settlements as required by law.”