Lincoln Financial Group and other insurance companies that pulled some annuities from the New York market in the wake of a new state regulatory requirement will likely reintroduce the products in coming weeks, now that the New York Department of Financial Services has issued guidance assuaging their concerns.
A New York rule upping the sales standard for brokers and agents recommending certain insurance products to consumers took effect for annuities on Aug. 1. Insurers that sell both fee- and commission-based annuity products in New York were concerned about a specific disclosure requirement contained in the rule, Insurance Regulation 187.
The New York Department of Financial Services issued guidance Wednesday removing some of the big question marks that insurance companies had around the disclosure.
Lincoln, the fourth-largest annuity seller in the U.S. last year, was one of the insurers that pulled its fee-based annuity products from the state, InvestmentNews reported last week. Spokeswoman Amy Norcini said Lincoln will likely rescind the pullback.
“We are pleased with the guidance and expect to include fee-based annuities in Lincoln’s New York product portfolio in the coming weeks,” she said.
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It’s not clear whether Jackson National Life Insurance Co., another company that pulled its fee-based annuities from the shelf as a result of the rule, will do the same. Spokesman Patrick Rich declined to comment.
The insurance lobby, however, was pleased overall with New York’s move, signaling that firms that had pulled products will likely reverse those decisions in coming weeks.
“We appreciate the effort by Deputy Superintendent James Regalbuto and the department to listen to industry’s concerns and work toward a sound, reasonable solution that allows insurers to offer a full range of products that can help New Yorkers meet their retirement income needs,” said Chelsea Crucitti, director of regulatory affairs at the Insured Retirement Institute.
The New York rule, which requires agents to make insurance recommendations in consumers’ best interests, mandated that insurers offering both fee-based and commission annuities provide consumers with a comparison showing the differences between the products.
Officials wanted consumers to know they have a choice in terms of product type. One type is sold by registered investment advisers and the other by brokers and agents receiving commissions.
New York’s new guidance stipulates that agents and brokers are required to make a disclosure to consumers only if they are dually licensed to sell both fee-based and commission products. The disclosure isn’t required if they can only sell one or the other.
Further, many insurers tweak the product features of their commission-based annuities based on product parameters set by distributors like wirehouse brokerages. There’d been confusion as to whether a side-by-side comparison of fee-based and commission annuities would have to show all these different commission options alongside the fee-based option.
That type of detailed disclosure isn’t required, however, insurers must disclose that they offer several versions of the product and that they may have different costs and benefits.
According to the guidance, insurers will be deemed to be in compliance with the insurance regulation if they are “working in good faith” to implement the disclosures.
“The department worked closely with insurers and distributors to ensure that insurers continue to offer a robust selection of annuity products to New Yorkers,” a department spokeswoman said.
The New York regulation takes effect for life insurance products Feb. 1.