New York State Department of Financial Services (DFS) has proposed a regulation to govern life insurance company practices related to increases in the premiums of certain life insurance and annuity policies.[1] The proposed regulation was published in the November 30, 2016 New York State Register and the public comment period closed on January 17, 2017. The proposed regulation addresses issues that have come under scrutiny by the Department regarding the determination and readjustment of non-guaranteed elements in life insurance policies, particularly with respect to universal life, indeterminate premium term, and whole life insurance, and annuity contracts.[2]

The proposed regulation would provide DFS the opportunity to review increases prior to implementation by requiring that life insurance companies notify DFS at least 120 days prior to an adverse change in non-guaranteed elements of an in-force life insurance or annuity policy. In addition to notifying DFS, the proposed regulation would require life insurance companies to notify consumers at least 60 days prior to the change.

“Under New York law, life insurers may only increase the cost of insurance on in-force policies when the experience justifies it and only in a way that is fair and equitable,” said DFS Superintendent Maria T. Vullo. “Many existing life insurance and annuity policies are owned by New York’s senior citizens who have dutifully paid premiums for years and can least afford increased costs to maintain insurance coverage. DFS will not stand by and provide life insurers free reign to implement unjustified cost of insurance increases on New Yorkers simply to boost profits.”[3]

Revisions to the proposed rule are expected to go out within the next two months. The final rule will go into effect 120 days after publication in the State Register, which the DFS believes will allow sufficient time for insurers and fraternal benefit societies to comply with the rule. The rule does not apply to other State agencies or local governments. New York state is the first to act on life insurance policy increases, but the regulation could be used as a precedent for other state insurance departments.

(See the full text of the proposed regulation at:  http://docs.dos.ny.gov/info/register/2016/nov30/pdf/rulemaking.pdf)

[1] NY Department of Financial Services Press Release, November 17, 2016. http://www.dfs.ny.gov/about/press/pr1611171.htm

[2] NY Department of Financial Services, Proposed Insurance Regulation 210, November 17, 2016. http://docs.dos.ny.gov/info/register/2016/nov30/pdf/rulemaking.pdf

[3] NY Department of Financial Services Press Release, November 17, 2016. http://www.dfs.ny.gov/about/press/pr1611171.htm