STATE OF NEW YORK
________________________________________________________________________
3522
2019-2020 Regular Sessions
IN SENATE
February 8, 2019
___________
Introduced by Sens. BRESLIN, SEWARD, ADDABBO -- read twice and ordered
printed, and when printed to be committed to the Committee on Insur-
ance
AN ACT to amend the insurance law, in relation to direct response
marketing of life insurance
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 3209 of the insurance law, as amended by chapter
2 616 of the laws of 1997, subsection (b) as amended by chapter 170 of the
3 laws of 2008, subparagraph (H) as amended, subparagraph (I) as added and
4 subparagraph (J) of paragraph 2 of subsection (b) as relettered by chap-
5 ter 535 of the laws of 2013, paragraph 1 of subsection (d), paragraph 2
6 of subsection (e) and subsection (h) as amended by chapter 13 of the
7 laws of 2002, is amended to read as follows:
8 § 3209. Life insurance, annuities and funding agreements disclosure
9 requirements. (a) Except as hereafter exempted, this section shall apply
10 to any solicitation, negotiation or procurement of life insurance, annu-
11 ities or funding agreements occurring within this state. This section
12 shall apply to any issuer of life insurance or annuity contracts or
13 funding agreements, including fraternal benefit societies and the life
14 insurance department of a savings and insurance bank. Unless otherwise
15 specifically included, this section shall not apply to: credit life
16 insurance; group life insurance; life insurance policies, annuity
17 contracts, and funding agreements issued in connection with pension and
18 welfare plans as defined by and to the extent covered by the federal
19 Employee Retirement Income Security Act of 1974 (ERISA); funding agree-
20 ments issued to other than individuals pursuant to subsection (b) of
21 section three thousand two hundred twenty-two of this article; and any
22 group annuity unless at least one certificate is subject to paragraph
23 two of subsection (b) of section four thousand two hundred twenty-three
24 of this chapter.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD09658-01-9
S. 3522 2
1 (b) (1) No policy of life insurance shall be delivered or issued for
2 delivery in this state [after the applicable effective date, as set
3 forth in subsection (n) of this section,] unless, at or prior to deliv-
4 ery of the policy, the prospective purchaser has been provided with the
5 following:
6 (A) a copy of the most recent buyer's guide; and [the preliminary
7 information required by subsection (d) of this section, at or prior to
8 the time an application is taken. When sales solicitations are made by
9 mail, without the involvement of an agent or broker, each initial solic-
10 itation must include a copy of the buyer's guide unless the policy for
11 which application is made provides for a period of at least thirty days
12 within which the applicant may return the policy for an unconditional
13 refund of the premiums paid, in which event the buyer's guide must be
14 delivered with the policy or prior to delivery of the policy; in addi-
15 tion, such solicitation must alert the prospective purchaser of the
16 right to receive, upon request, a buyer's guide and a policy summary
17 prior to delivery of the policy; and]
18 (B) a policy summary [upon delivery of the policy], provided that the
19 policyholder may return the policy for an unconditional refund of the
20 premiums paid within the period of time provided under paragraph eleven
21 of subsection (a) of section three thousand two hundred three of this
22 article and paragraph thirteen of subsection (a) of section four thou-
23 sand two hundred forty of this chapter.
24 (2) No annuity contract or life insurance policy or certificate with
25 an equity index account shall be delivered or issued for delivery in
26 this state unless, [no later than at the time of application] at or
27 prior to delivery of the contract, the prospective purchaser has been
28 provided with a disclosure statement containing the following:
29 (A) a statement in bold type to the effect that the equity index
30 account provides benefits linked to an external equity index and does
31 not participate directly in the equity market;
32 (B) a statement identifying the equity index used in the equity index
33 formula, together with a description of any alternate index should the
34 initial index no longer be publicly available;
35 (C) a statement indicating whether paid dividends are included in
36 changes in the equity index, together with a description of how such
37 dividends, or lack thereof, would affect the changes in the equity
38 index; the statement must provide the average dividend rate over the
39 lesser of ten years or the calculable life of the index;
40 (D) a statement fully describing the equity index formula;
41 (E) a statement explaining and illustrating the equity index formula
42 including any features of the equity index formula subject to change
43 after issuance of the contract, policy or certificate;
44 (F) a statement identifying the initial minimum guaranteed interest
45 rate for the minimum accumulation value of an equity index account and
46 any withdrawal charge;
47 (G) a statement identifying the initial current and the minimum speci-
48 fied participation rate, i.e., how much of the increase in the index
49 will be used to calculate the indexed linked interest rate, if any;
50 (H) a statement identifying the initial current and the minimum upper
51 limit or cap on the indexed linked interest rate, if any;
52 (I) for a life insurance policy crediting additional amounts in
53 accordance with an equity index less frequently than annually, a state-
54 ment to the effect that: if the policyholder requests a full surrender
55 of a policy prior to the expiration of the equity index crediting peri-
56 od, no additional interest based on the equity index will be credited
S. 3522 3
1 and that only the guaranteed interest will be credited to the account;
2 and the policyholder is advised to consider alternatives to a full
3 surrender of the policy prior to the expiration of the equity index
4 crediting period, such as a policy loan or, if available, a partial
5 withdrawal of the policy; and
6 (J) other disclosure information the superintendent deems appropriate.
7 (c) Every insurer must provide, to any policyholder who so requests, a
8 policy summary for each in-force premium-paying policy for which no
9 policy summary has ever been furnished. The insurer may charge the poli-
10 cyholder a reasonable fee for preparation of this summary, subject to
11 guidelines specified in rules promulgated by the superintendent.
12 (d) [The preliminary information shall be in writing and include, to
13 the extent applicable, the following:
14 (1) the name and address of the insurance agent or broker or, if no
15 agent or broker is involved, a statement of the procedure to be followed
16 in order to receive responses to inquiries concerning the preliminary
17 information;
18 (2) the full name and home office, administrative office or branch or
19 agency office address of the company in whose name the life insurance
20 policy is to be written;
21 (3) the date of the preliminary information and the generic name, the
22 initial amount of insurance and the initial annual premium for the basic
23 policy;
24 (4) the total guaranteed cash surrender values for the basic policy,
25 at the end of the tenth and twentieth policy years or at the end of the
26 premium-paying period if earlier. These values may be shown on a per
27 thousand or per unit basis;
28 (5) the effective policy loan annual percentage interest rate, if the
29 policy would contain this provision, and whether this rate is applied in
30 advance or in arrears, adjustable or fixed;
31 (6) for the life insurance policies described in paragraph one of
32 subsection (n) of this section, life insurance cost indexes and the
33 equivalent level annual dividend for the basic policy for ten and twenty
34 years, but in no case beyond the premium-paying period;
35 (7) in addition, the applicant shall be advised that, when the policy
36 is issued, a complete policy summary, including cost data, based on the
37 benefits, premiums and dividends of the policy as issued, will be
38 furnished; and that, following the receipt of the policy and policy
39 summary, there will be a period of not less than ten days within which
40 the applicant may return the policy for an unconditional refund of the
41 premiums paid; and
42 (8) notwithstanding the foregoing, no applicant for life insurance
43 shall be prevented or delayed in effecting or applying for coverage by
44 the requirements of this section. In such cases where prior to applica-
45 tion it is impractical to provide any items prescribed by this section,
46 such items may be estimated in good faith or furnished as soon thereaft-
47 er as practical prior to delivery of policy.
48 (e)] A policy summary shall include the following:
49 (1) a prominently placed title as follows:
50 "STATEMENT OF POLICY COST AND BENEFIT INFORMATION";
51 (2) the name and address of the insurance agent or broker, or, if no
52 agent or broker is involved, a statement of the procedure to be followed
53 in order to receive responses to inquiries regarding the policy summary;
54 (3) the full name and home office, administrative office or branch or
55 agency office address of the company in whose name the life insurance
56 policy is to be or has been written;
S. 3522 4
1 (4) the generic name of the basic policy and each rider;
2 (5) [for the life insurance policies described in paragraph one of
3 subsection (n) of this section,] the following amounts, where applica-
4 ble, for the first five policy years and representative policy years
5 thereafter sufficient to clearly illustrate the premium and benefit
6 patterns, including the years for which life insurance cost indexes are
7 displayed and at least one age from sixty through sixty-five or maturi-
8 ty, whichever is earlier:
9 (A) the annual premium for the basic policy;
10 (B) the annual premium for each optional rider;
11 (C) guaranteed amount payable upon death at the beginning of the poli-
12 cy year regardless of the cause of death, other than suicide or other
13 specifically enumerated exclusions, which is provided by the basic poli-
14 cy and each optional rider, with benefits provided under the basic poli-
15 cy and each rider shown separately;
16 (D) total guaranteed cash surrender values at the end of the year with
17 values shown separately for the basic policy and each rider;
18 (E) cash dividends payable at the end of the year with values shown
19 separately for the basic policy and each rider. Dividends need not be
20 displayed beyond the twentieth policy year; and
21 (F) guaranteed endowment amounts payable under the policy which are
22 not included in guaranteed cash surrender values above;
23 (6) the effective policy loan annual percentage interest rate if the
24 policy contains this provision, specifying whether this rate is applied
25 in advance or in arrears. If the policy provides for an adjustable loan
26 interest rate, the policy summary shall so state, shall set forth the
27 frequency at which the rate is to be determined for that policy, and
28 shall describe the index upon which the maximum rate is based at the
29 time the policy is issued;
30 (7) [for the life insurance policies described in paragraph one of
31 subsection (n) of this section:] (A) life insurance cost indexes for ten
32 and twenty years but in no case beyond the premium-paying period. Sepa-
33 rate indexes are to be displayed for the basic policy and for each
34 optional term life insurance rider. Such indexes need not be included
35 for optional riders which are limited to benefits such as accidental
36 death benefits, disability waiver of premium, preliminary term life
37 insurance coverage of less than twelve months and guaranteed insurabili-
38 ty benefits, nor for basic policies or optional riders covering more
39 than one life;
40 (B) the equivalent level annual dividend, in the case of participating
41 policies and participating optional term life insurance riders, under
42 the same circumstances and for the same durations at which life insur-
43 ance cost indexes are displayed;
44 (8) a policy summary which includes dividends shall also include a
45 statement that dividends are based on the company's current dividend
46 scale and are not guaranteed; in addition, the summary shall[, for the
47 life insurance policies described in paragraph one of subsection (n) of
48 this section,] include a statement in close proximity to the equivalent
49 level annual dividend as follows: "An explanation of the intended use of
50 the equivalent level annual dividend is included in the buyer's guide";
51 (9) a statement in close proximity to the life insurance cost indexes
52 as follows:
53 "AN EXPLANATION OF THE INTENDED USE OF THESE INDEXES IS PROVIDED IN
54 THE BUYER'S GUIDE"; and
55 (10) the date on which the policy summary is prepared.
S. 3522 5
1 [(f)] (e) The policy summary must be a separate document. All informa-
2 tion required to be disclosed must be set out in such a manner as not to
3 minimize or render any portion thereof obscure. Any amounts which remain
4 level for two or more years of the policy may be represented by a single
5 number if it is clearly indicated what amounts are applicable for each
6 policy year. Amounts in paragraph five of subsection [(e)] (d) of this
7 section shall be listed in total, not on a per thousand or per unit
8 basis. If more than one insured is covered under one policy or rider,
9 guaranteed death benefits shall be displayed separately for each insured
10 or for each class of insureds if death benefits do not differ within the
11 class. Zero amounts shall be displayed as zero and shall not be
12 displayed as a blank space.
13 [(g)] (f) Every insurer shall maintain, at its home office or princi-
14 pal office, a complete file containing one copy of each policy summary
15 form authorized by the insurer for use pursuant to this section.
16 [(h)] (g) An agent or broker shall inform a prospective purchaser,
17 prior to commencing a life insurance sales presentation, that he is
18 acting as a life insurance agent or broker, and inform the prospective
19 purchaser of the full name of the insurer which he is representing. In
20 sale situations in which an agent or broker is not involved, the insurer
21 shall identify its full name.
22 [(i)] (h) As used in this section, "buyer's guide" means a separate
23 document published and disseminated by insurers. The language therein
24 shall be promulgated by the superintendent, and shall, to the extent
25 practicable and in the public interest as determined by the superinten-
26 dent, be consistent with the latest version of a buyer's guide as
27 adopted by the national association of insurance commissioners.
28 [(j)] (i) For life insurance policies, except term life insurance
29 policies, which are to be issued to qualify for special tax treatment
30 under subsection (b) of section four hundred three of the Internal
31 Revenue Code of 1986, as amended, a written notice shall be delivered to
32 the proposed insured in a manner satisfactory to the superintendent at
33 or prior to the time an application is taken and shall read as follows:
34 "The purchase of a life insurance policy with cash value, which quali-
35 fies for special tax treatment under section 403(b) of the Internal
36 Revenue Code of 1986, as amended, may not be appropriate for individuals
37 seeking to maximize the accumulation of funds for retirement or for
38 individuals seeking life insurance coverage primarily to provide a
39 survivorship benefit for the spouse in the event of death prior to
40 retirement. If an individual needs coverage to continue after retire-
41 ment, current tax laws require the commencement of taxable distributions
42 under the tax sheltered annuity plan (TSA) no later than age seventy and
43 one-half which may necessitate some adjustment in the cash value life
44 insurance policy or may result in increased insurance costs in future
45 policy years. You should consult with your tax advisor before purchasing
46 life insurance with cash value as part of a tax sheltered annuity
47 (TSA)."
48 [(k)] (j) The superintendent shall promulgate by regulation the
49 contents [and], allowable format [of the preliminary information] and
50 [the] information to appear in the policy summary. The superintendent
51 shall also promulgate by regulation standards governing the content,
52 format and use of illustrations of individual life insurance policies
53 and certain group life insurance policies and certificates, life insur-
54 ance policies subject to section four thousand two hundred thirty-two of
55 this chapter, variable life insurance policies under which the death
56 benefits and cash values vary in accordance with the unit values of
S. 3522 6
1 investments held in a separate account and individual annuities, indi-
2 vidual funding agreements, variable annuities, and group annuity
3 contracts if any certificate is issued to which paragraph two of
4 subsection (b) of section four thousand two hundred twenty-three of this
5 chapter applies. The illustration regulation shall be consistent, to the
6 greatest extent practicable and in the public interest as determined by
7 the superintendent, with the illustration regulations as adopted by the
8 national association of insurance commissioners. The superintendent in
9 developing regulations to govern the content and format of the [prelimi-
10 nary information,] policy summary and illustrations shall ensure that
11 such forms are presented in an easy, concise and meaningful way to
12 enable consumers to understand the operation of the policy or contract.
13 [(l)] (k) An insurer of any life insurance policy or annuity contract
14 subject to this section shall notify the superintendent whether its
15 policies or contract forms have been or will be marketed with or without
16 an illustration. For those policies and contracts marketed with an
17 illustration which complies with the regulations promulgated pursuant to
18 subsection [(k)] (j) of this section, no [preliminary information or]
19 policy summary shall be required. For those policies which are not
20 marketed with an illustration, the [preliminary information and] policy
21 summary shall be provided pursuant to the provisions of this section.
22 [(m)] (l) The superintendent, by regulation, shall determine the
23 applicability of the illustration regulation promulgated pursuant to
24 subsection [(k)] (j) of this section to group life insurance policies
25 and group annuities and funding agreements. Such determination shall be
26 consistent, to the greatest extent practicable and in the public inter-
27 est, with the illustration regulations as adopted by the national asso-
28 ciation of insurance commissioners.
29 [(n) The effective dates of this section as applied to policies of
30 life insurance, annuity contracts, and funding agreements shall be as
31 follows:
32 (1) for individual life insurance policies, certain group life insur-
33 ance policies and certificates and life insurance policies subject to
34 section four thousand two hundred thirty-two of this chapter, January
35 first, nineteen hundred ninety-eight;
36 (2) for annuities and funding agreements, the date of promulgation of
37 regulations by the superintendent pursuant to subsection (k) of this
38 section but not later than June thirty, nineteen hundred ninety-eight;
39 (3) for variable life insurance policies and variable annuities, the
40 date of promulgation of regulations by the superintendent but not later
41 than January first, nineteen hundred ninety-nine.
42 No less than three months prior to promulgating the regulations
43 required to implement subsection (k) of this section pursuant to para-
44 graphs two and three of this subsection, the superintendent shall hold
45 public hearings on such regulations.]
46 § 2. Paragraph 3 of subsection (a) of section 2123 of the insurance
47 law, as amended by section 37-a of part D of chapter 56 of the laws of
48 2013, is amended and a new paragraph 4 is added to read as follows:
49 (3) Any replacement of individual life insurance policies or individ-
50 ual annuity contracts of an insurer by an agent, representative of the
51 same or different insurer or broker shall conform to standards promul-
52 gated by regulation by the superintendent. Such regulation shall:
53 (A) specify what constitutes the replacement of a life insurance poli-
54 cy or annuity contract and the proper disclosure and notification proce-
55 dures to replace a policy or contract;
S. 3522 7
1 (B) require notification of the proposed replacement to the insurer
2 whose policies or contracts are intended to be replaced;
3 (C) in the case of an application that is initiated as a result of a
4 direct response solicitation, include provisions relating to the duties
5 of insurers with respect to direct response solicitations that are
6 consistent with the life insurance and annuities replacement regulation
7 as adopted by the national association of insurance commissioners;
8 (D) require the timely exchange of illustrative and cost information
9 required by section three thousand two hundred nine of this chapter and
10 necessary for completion of a comparison of the proposed and replaced
11 coverage; and
12 [(D)] (E) provide for a sixty-day period following issuance of the
13 replacement policies or contracts during which the policy or contract
14 owner may return the policies or contracts and reinstate the replaced
15 policies or contracts.
16 (4) For purposes of paragraph three of this subsection, "direct
17 response solicitation" means a solicitation through a sponsoring or
18 endorsing entity or individual solely through the mail, telephone, the
19 internet or other mass communication media.
20 § 3. Paragraph 6 of subsection (a) of section 4226 of the insurance
21 law, as added by chapter 616 of the laws of 1997 is amended and a new
22 subsection (e) is added to read as follows:
23 (6) replace the individual life insurance policies or individual annu-
24 ity contracts of an insurer by the same or different insurer without
25 conforming to the standards promulgated by regulation by the superinten-
26 dent. Such regulation shall:
27 (A) specify what constitutes the replacement of a life insurance poli-
28 cy or annuity contract and the proper disclosure and notification proce-
29 dures to replace a policy or contract;
30 (B) require notification of the proposed replacement to the insurer
31 whose policies or contracts are intended to be replaced;
32 (C) in the case of an application that is initiated as a result of a
33 direct response solicitation, include provisions relating to the duties
34 of insurers with respect to direct response solicitations that are
35 consistent with the life insurance and annuities replacement regulation
36 as adopted by the national association of insurance commissioners;
37 (D) require the timely exchange of illustrative and cost information
38 required by section three thousand two hundred nine of this chapter and
39 necessary for completion of a comparison of the proposed and replaced
40 coverage; and
41 [(D)] (E) provide for a sixty-day period following issuance of the
42 replacement policies or contracts during which the policy or contract
43 owner may return the policies or contracts and reinstate the replaced
44 policies or contracts.
45 (e) For purposes of paragraph six of subsection (a) of this section,
46 "direct response solicitation" means a solicitation through a sponsoring
47 or endorsing entity or individual solely through the mail, telephone,
48 the internet or other mass communication media.
49 § 4. This act shall take effect immediately.
