NY Insurance Trade Group Sues Over State’s Best-Interest Regulation
An insurance industry trade group is challenging the legality of a best-interest regulation adopted in New York earlier this summer on the sale of insurance and annuities, according to news reports.
The National Association of Insurance and Financial Advisors for New York State has filed a lawsuit in New York Supreme Courtclaiming the regulation by the New York Department of Financial Services, which requires agents and brokers to ensure sales of insurance and annuities are in the best interest of the client, contradicts current New York law, according to FA magazine.
The department adopted the regulation in July and it goes into effect August 2019, covering various insurance products, including life, term life and group life insurance policies and individual and group annuities, but exempting pension risk transfer arrangements, credit life insurance and life settlement transactions, and corporate- and bank-owned life insurance arrangements.
NAIFA says the New York regulation contradicts state insurance statues requiring agents and brokers “to act as an agent of [an] authorized insurer,” FA magazine writes, citing the suit. The DFS’s rule “can not be squared” with the statute, according to the suit, the publication writes.
“We’re challenging the New York regulation because it creates a clear legal conflict with New York statute, and that puts agents in an endless position of legal peril,” said Tancred Schiavoni, the attorney at O’Melveny & Myers who represents NAIFA-NYS, according to FA magazine.
DFS’s regulation was touted as a major victory for consumers by New York Gov. Andrew Cuomo and Financial Services Superintendent Maria Vullo in July, the publication writes. But it also faces two more similar lawsuits from the Independent Insurance Agents and Brokers of New York and the Professional Insurance Agents of New York, according to FA magazine.
NAIFA, meanwhile, was one of the plaintiffs suing to undo the Department of Labor’s fiduciary rule. The Obama-era regulation purported to require retirement account advisors to put clients’ interests first but was vacated in an appeals court earlier this year. The DFS rule is more limited in scope, as it applies only to insurance and annuities products sold by insurance agents and brokers, FA magazine writes.
“The war pitting financial services conglomerates against mom and pop just keeps getting uglier,” Knut Rostad, president of the Institute for the Fiduciary Standard, tells the publication. “[The] next tact will be calling ‘best interest’ fake news.”