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Disclosure Requirements for Non-illustrated Products


There often is a bit of confusion concerning the disclosure requirements for non-illustrated products.

This requirement comes in part from NY Section 3209. This section calls for preliminary information (see 3209(d) for requirements) to be provided at or before the time of application. Then a policy summary (see 3209(e) for requirements) is required at or before the time of policy delivery.

However, 3209(l) then goes on to say:

‘(l) An insurer of any life insurance policy or annuity contract subject to this section shall notify the superintendent whether its policies or contract forms have been or will be marketed with or without an illustration.  

For those policies and contracts marketed with an illustration which complies with the regulations promulgated pursuant to subsection (k) of this section, no preliminary information or policy summary shall be required.

For those policies that are not marketed with an illustration, the preliminary information and policy summary shall be provided pursuant to the provisions of this section.’

Now, here’s where things get messy for non-illustrated products. Preliminary Information & the Policy Summary must be provided. These include projections on a current basis. But NY Regulation 74 indicates that any depiction of non-guaranteed elements to be an illustration. But the product is supposed to be non-illustrated. And now we are going around in the dreaded compliance circle.

To allow for non-illustrated products to exist in NY, the Department has taken the position that as long as the Preliminary Information & the Policy Summary show only the non-guaranteed elements required by 3209 (and 53-2.1 & 53-22 for UL type policies) then these would not be considered illustrations within the meaning of Regulation 74.

Again, a bit messy.

Confused about designing annuities in NY?

If the answer is yes, then our Demystifying NYS Annuity Nonforfeiture course is your go-to source. This course will teach you everything you need to know about NYS nonforfeiture law and what you need to do to design a product that complies.

This course, authored by Tom Hartman, Senior Compliance Actuary (formerly with NYSDFS), clarifies the requirements in detail so you know exactly which product designs will and will not work.

When it comes to understanding these requirements, few are as knowledgeable as Tom. This course will help you develop products with confidence, determine an appropriate filing method, and achieve an approval quickly.

ACT NOW and purchase Demystifying NYS Annuity Nonforfeiture for only $1499/single user access or $2998/unlimited access.

Download this free white paper to learn some basic and common drafting issues.

If you would like more information about the Demystifying NYS Annuity Nonforfeiture course, please email Glenda Bean or call her directly at (518) 512-0172.

Getting Out the Pencil in New York

I’m no actuary, but I’m pretty darn good at math for a regular person.

And yet, every time I read a NY policy with an accelerated death benefit that discounts the payment, which is fairly regularly, I have to get out a pencil and a piece of paper and think, think, think.

Here’s a very simplified version of how NY describes the interest rate that may be used to figure the discount.

The maximum interest rate cannot exceed the greater of:
(a) yield on 90-day T-Bills; and
(b) maximum adjustable policy loan interest rate based on the greater of:
     (i) Moody’s Average; and
     (ii) the policy’s guaranteed rate + 1%.

There are basically three values in the above sentence: T-Bills, Moody’s, and “R+1.” Using pencil and paper, I must convince myself, usually more than once, that if a company uses only one of the values to set the rate, then the rate is compliant.

Is this immediately clear to everyone but me? It’s completely intuitive to my colleague, Tom Hartman, but he’s an actuary, and I view actuaries as outliers.

It’s completely counterintuitive to me.

If the acceleration discount uses, let’s say, the Moody’s rate, I have to assign a low number to the Moody’s and higher rates to the T-Bills and R+1 rates, and then prove to myself that it’s compliant. Then I have to assign a high number to the Moody’s and lower numbers to the other two rates and ponder that situation. Then I do it again with the Moody’s rate in the middle. Amazingly enough, it always works.

Perhaps the issue is that regulations do not usually set maximums by giving the “greater of” methodology. I think I am accustomed to regs using “lesser of” language when capping a maximum, and, conversely, using “greater of” language for the setting of minimums.

If a regulatory maximum is the greater of three values, of course any one of the values can be used without regard to the other two, because the value selected is either the lowest, the middle value, or the highest. And since we’re allowed to use the “greater of” the values, meaning the highest value, of course we can use any one of the values because it’s either the highest value, or less than the highest value.

Do I sound convincing? I’m actually trying to convince myself. With luck, next time I come across a discounted accelerated death benefit, and I look at New York’s Regulation 143 to confirm compliance, it will all be crystal clear to me and my pencil will remain in my desk drawer.

Insurance Compliance Symposium and Fall Foliage in NH - October 25, 2018

If you’re interested in learning about insurance advertising compliance in the digital era, sharing your challenges, and looking at solutions as a group, join us on THURSDAY, OCTOBER 25, 2018, in Bedford, New Hampshire. We are hosting another one-day Currin Insurance Compliance Symposium and will be exploring some of the unique challenges digital advertising presents compliance professionals and best practices for reviewing content for digital channels.

This day will be full of information with the opportunity to share and discuss your experiences. You will walk away with ways to approach your digital advertising review process, as well as an increased knowledge about how to review ads for the digital channel.

We want to tailor this event to your needs and challenges. We encourage attendees to email questions for discussion in advance to Glenda Bean


We are intentionally keeping this group small to have real discussions on these important issues. Don’t hesitate...register now and secure your spot. Read more here.

The Bedford Village Inn (BVI) is New England at its finest...where “the beauty of nature blends seamlessly with sophisticated New England style.” BVI is located 10 miles from the Manchester-Boston Regional Airport with complimentary shuttle service to and from. New England is known for its spectacular foliage this time of year so we hope you’re able to stay and enjoy the surrounding area. CICS attendees are eligible for a discounted room rate (Wednesday 10/24 until Sunday 10/28). Attendees are responsible for booking their own transportation and accommodations.

The link below will take you directly to the hotel group reservation page (simply change the dates as needed). If you call the hotel directly for reservations, our group code is: CUR19GB5.

The Grand at Bedford Village Inn Rooms for Currin Compliance.

The Bedford Village Inn
2 Olde Bedford Way
Bedford, NH 03110

Toll-free: 1-800-852-1166
Local: 603- 472-2001


Accelerated Death Benefits in CA

 AICP Western Chapter E-Day in San Francisco

During the AICP Western Chapter E-Day held in San Francisco on May 3rd, we had a session on accelerated death benefits in CA presented by Leslie Tick, Emily Smith, and Ryan Delatorre of the CDI, and it was a VERY informative! The session was titled 10295 Accelerated Death Benefits: How to Get Your 10295 Filing to Sail Through the Policy Approval Process.

While I won’t provide all the information that was shared, I have included here what might be helpful to those contemplating a 10295 filing or waiting for one to be reviewed.

As the name of the session implies, the focus of the session was accelerated death benefits for chronic illness under 10295.

Before I jump into the tips shared in the presentation, there was discussion regarding the current review time being experienced by all with a filing in the queue. The following is a summary of that discussion:

There are a limited number of reviewers for 10295 benefits who are also responsible for LTC review, and their queue currently has a backlog. While they are making good progress getting caught up, there is an understandable delay in what would be considered the normal turn-around time. Without the backlog, the goal to have the first set of reviewer comments out to the company 4 months after submission. Progress is being made on the backlog, but filings from 2017 are still being reviewed, and they couldn’t say when the review of 2018 submissions would begin. It was clear to me that they understand the concerns of the carriers with filings still in the queue, and this is where their presentation began.

The following is a summary of the tips shared by the CDI for those who are planning on submitting a 10295 filing. You will see that the theme is focused on ways to make your filing cleaner, resulting in shorter review time, and hopefully quicker approvals for all:

  1. Review 10295 in its entirety to ensure that your benefit complies (easy enough, but many of the objections written are a result of this oversight).
  2. DO NOT submit the Compact version in CA. CA law is different, resulting in a CA version of the form. (Apparently this happens quite often as well.)
  3. The compulsory provisions set forth in 10271(c) should also be included.
  4. Do not require that a rider be inforce for a claim to be submitted. (Your general exclusions section should be reviewed to ensure there are no conflicts with 10295.16.)
  5. Explain the process for certification of chronic illness as outlined in 10295(b)(2)(B)(ii)(I)-(IV).
  6. Include lump sum and periodic payment options 10295.1(a)(3).
  7. Allow multiple accelerations on the same and different qualifying events 10295.1(b)(2) & (3).
  8. Include an explanation and a numeric illustration of how the insured will pay for the acceleration per 10295.1(e). (This can be included in the rider or in an attachment to the rider.)
  9. Identify the specific forms the rider will be used with (policies, applications, notices). Do not include a statement that it will be used with forms in the future.
  10. Section headings, page numbers, and tables of contents are very helpful to your reviewer.

If your filing is in the queue, and after reviewing this list, you feel that some changes to your forms are necessary, here is what you should do:

  1. Send a note to your assigned reviewer to ask the status of your review. Basically, if they haven’t started yet, you can make changes to your filing without losing your place in line. Include a clear explanation of why you made the changes. For example: “Rider form replaced prior to review to comply with payment options as described in 10295.1.”
  2. If you had a previously approved form and now you are submitting an updated version with few changes, let the reviewer know by describing the changes in your filing description and include a redline comparison to the previously approved form.
  3. If you are responding to objections, always include redlines. Be sure you are not making changes that are not explained and that you have included the correct redlined version. The redlines seem to be a place where some carriers can be a bit sloppy, causing delays in review.

If you have serious deadlines, you can include them in your filing description along with an explanation. Filings are reviewed in the order they are received, but an understanding of the carrier’s intentions is helpful to your reviewer.

If you have questions or need assistance with your filing, please let us know; as always we are happy to help! Call (518) 692-2494 or send us an email.

Electronic Applications in NY


Electronic applications seem to be reviewed in a much more expansive way by New York than are paper applications.

We get questions about replacement, about how consumers get to review their answers, and about follow-up from underwriting. These aren’t bad questions, but they generally only come up when an application is electronic.

In an electronic application, the NYSDFS policy form reviewers want to know what happens when it’s determined that the policy being applied for is a replacement. Fair enough. But what happens when a replacement occurs with an agent? Is the electronic situation mysterious, and the agent situation obvious? I tend to think both situations are fairly obvious and don’t need to be explained in a policy form filing. NY rules about what needs to happen in a replacement are clear. And every company already has to explain its Regulation 60 (replacement) procedures, but that’s done in a separate, broad-scope Reg 60 filing. A company’s Reg 60 procedures have to be rehashed on an electronic-application form filing, but not on a paper-application form filing.

NY is very concerned that consumers get a chance to review and change their answers. Fair enough. But how does NY know that an agent gives a consumer that opportunity? The how-consumer-gets-to-review issue is big on electronic-application filings, but non-existent on paper-application filings.

And then there’s underwriting, aka Reflexive Questions. When follow-up (reflexive) questions are electronic and could appear on the application in the “blank” Additional Information section, along with the answers, NY requires they be filed for approval. In the in-person situation, the agent can say most anything, ask any question, or give directions. On a paper application, only the consumer’s answers would appear as Additional Information.

NY also usually has comments on any “extra” text that appears on the electronic screenshots, text that is instructional or definitional or navigational help. It’s usually allowed, if it’s innocuous enough, in the individual reviewer’s opinion. But the extra text is definitely read and reviewed, unlike everything that an agent says when a consumer is filling out an application.

Maybe this is just the nature of the beast. Regulators are able to review what’s written, so they do. They are not able to review conversations between agents and consumers, so they don’t. And maybe, as we move into an increasingly electronic world, where everything is reviewable, we’ll have to get used to more review. But does that really make sense?

Tom Hartman

Tom square.jpg

Tom Hartman, formerly a senior actuary with NYSDFS, is now able to work with you at LONG last!

Most, if not all of you know Tom Hartman from his days as a senior actuary with NYSDFS. He had a reputation of doing a tremendous volume of work and doing it well. Tom was always helpful to companies trying to figure out how to comply with some of NY’s byzantine rules and regulations. Guess what? He can do that for you again!

Since he left DFS, all of us – and none more than Tom himself - have been counting the days until he could come out of his basement and work directly with you. More than once he has mused in the two years since leaving DFS while barred from appearing before the Department, that it was hard not to be able to do the things he is best at and has the strongest reputation for, but now he can! 

He has learned about the compact and other states and he has done important and great work since joining us, and now he is free to do what he and so many of you want him to do . . . the work he is best at and has the strongest reputation for: New York product work. 

Please welcome Tom to the industry in his new and full capacity as senior compliance actuary at CCS. We are thrilled he is with us and we know you will be too!

IAdCA 2018 is in the books!

IAdCA (Insurance Advertising Compliance Association) held another great conference last week, this time in Austin, Texas. This was my first conference as president and while I am proud of what we held, I certainly learned some lessons to carry over to next year. And like those who work on the Macy’s Thanksgiving Day Parade, our work on next year’s event (to be held in Philadelphia, PA) begins right away, while those “things I don’t want to forget” are fresh.

We had a very strong program this year, put together by our amazing Education Committee Co-Chairs, Jim Namorato from Genworth and Heidi Gabel from Gameplan Financial. Mary Jo Hudson, former Ohio Commissioner and current partner at Squire Patton Boggs (US) LLP, was a very informative keynote speaker and one of my personal highlights. I am really looking forward to a report she is publishing this week on what she describes as disparagement of the insurance regulatory framework. 


Fortunately, because the insurance regulatory framework is so strong, I am confident that we will be able to line up an equally fantastic panel of experts, both from industry and regulatory agencies (state and federal), next year.

Thank you to all who stopped by our booth this year – it was great to see you as always. And what would an IAdCA conference be without Alan Prochoroff of Insurance Compliance Insight, one of our fabulous sponsors for many years. 

Proposed Regulation 187 (Suitability in Life Insurance and Annuity Transaction)


I am sure by now most of you have read the proposed revision to NY’s suitability regulation – or at least a news article about it. There have been quite a few. Because the comment period is still open, it is not too late to make your views known to NYSDFS. 

I have many opinions and thoughts about this proposal – some of which I wrote about in an earlier blog post. The longer I sit with it, the more thoughts and opinions I have. Here is one that I did not write about in my earlier post and that I have been ruminating on the last couple of weeks… 

Many of us who are involved in annuity filings, and have made DOL-related fee-only or reduced-commission filings, have heard from DFS in recent months that the DOL compliance obligations of producers should not impact what products are offered, by those producers, to consumers. They have pulled out a circular letter from 1955 and are once again focused on all individual products being “generally available.” They are adamant that they will not approve products that are developed for one distributor. Where they will allow some flexibility by distribution channel, they have stated in objection letters that a distribution channel means, for example, all banks in NY, not all Citizen Banks in NY. Absent a recognized distribution channel, our clients have been told, the product must be “generally available.” 

In that context, what does the definition of suitable mean? “Suitable means in furtherance of a consumer’s needs and objectives under the circumstances then prevailing, based upon the suitability information provided by the consumer and all available products, services, and transactions” (emphasis added). Does “all available products” mean all generally available products? Read with §224.5(c)(1)(i) of the Reg., it appears they do mean only those products, services, and transactions of a single company because that paragraph states that an insurer shall provide consumers with “all relevant policy information with respect to evaluating any transaction or proposed transaction, including a comparison, in a form acceptable to the superintendent, of all available policies of the same product type offered by the insurer; …”

Presumably the intent is for the information provided by the insurer to line up with the products considered by the producer for recommendation to the consumer. Leaving aside the question of how many insurers’ products must be considered and therefore how many disclosures must be provided to each individual consumer, what about all the distributor-specific products that one insurer might have? Is part of the intent of the regulation to bring us back to the days before the 2000 OGC opinion on class distinctions by making an onerous disclosure and suitability standard? Is this a way to go back to what the DFS has often waxed nostalgic for? That time when one company had only one UL policy or one FPDA because the DFS felt having two, unless the second fell into a small number of clearly recognized distribution channels, was unfairly discriminatory? Perhaps not, but the more I think about it the more it seems so to me. How else can these compliance burdens be met? And more than anything, doesn’t that limit product availability to consumers based on producer and insurer compliance burdens? 

VT Bulletin 198

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On Monday, January 8, 2018 Vermont joined Iowa and Tennessee and issued detailed guidance on providing advice for securities and insurance products. Insurance Bulletin 198 (and Securities Bulletin S-2018-01) is a joint bulletin that the Department of Financial Regulation felt was necessary in order to provide financial professionals additional guidance on what activities are and are not permissible when it comes to providing advice on securities and insurance products.

The Department had issued more general guidance back in 2011, however, they stated two specific reasons for providing more detailed information now.

First, the Department said, there has been “an increase in investigations and enforcement actions relating to unregistered investment advice.”

Second, the “continuing evolution of state and federal suitability laws that now require an extensive financial analysis of a consumer’s financial affairs and a discussion of broad financial trends prior to making a recommendation on an insurance product or an investment/securities product.”

One point I found interesting is that, in the past, we’ve thought of this guidance as related to “source of funds”; that is, a specific focus on where the funds are coming from, and who can provide what level advice on those funds. While that’s still something that is being addressed in this bulletin, the #2 reason the department cited is related but broader than just source of funds. It goes to the growing discussions and developing regulations around how financial services are provided to consumers and what standard of care is owed to those consumers of financial services.

With NY’s proposed changes to their suitability regulation (which includes a number of significant changes, one of which is including life insurance within the suitability standards) as well as the questions of what will become of the DOL rule and what will the SEC do, as well as the NAICs current work on incorporating “best interest” standards into the suitability model, it’s clear that there are lots of questions around how financial transactions should be handled and what the burdens of the financial professionals are to ensure consumers are getting the “best” products and services for their needs.

With this bulletin, VT is stepping into the arena to add a bit more clarity at least around who can provide what services, and what types of discussions are permissible depending on the licensing and/or registration the financial professional holds. While only two other states have issued nearly identical guidance, we think it’s prudent for financial professionals to follow these guidelines regardless of what states they live in.

Why? Because this language is the most detailed we’ve seen, except in TN and IA and by using it as a benchmark of how financial discussions should be had and what the limits of those discussions may be, it allows financial professionals to say that they are trying their best to provide advice that they’re qualified to give without stepping over any boundaries. It shows a commitment to using integrity with consumers, and that even for states outside of VT, IA, and TN, it may provide a “safe haven” of sorts to be able to show documentation of complying with these regulations.

NY Regulation 210: Non-Guaranteed Elements

Are you confident you understand the scope of what your company needs to do by March 19th to be compliant with this new regulation?

If not, there is only one place you need to be on Feb 6th –-> Irvine, CA.

We will spend hours discussing the regulation, its history and implementation. If you haven’t registered, you should do so right away!

This may be your last chance to talk to experts and peers before the regulation goes into effect. Don’t miss it!

Space is limited.

Proposed revisions to Suitability in NY: What next?

You may have missed the publication of Proposed revisions to NY’s Regulation 187 as it came out as many of us were celebrating holidays and taking a few well-deserved days off. However, we are all back to work now and as we continue to grapple with implementing the mandates of Regulation 210 (regarding non-guaranteed elements), we have a new proposal: Suitability in Life Insurance and Annuity Transactions. Yep, you read that correctly, Suitability in Life Insurance and Annuity Transactions.

In some ways, suitability is a misnomer because one thing this regulation does is equate suitability and best interest in a new, direct way. Before the DOL rule, I often spoke to groups about what seemed to be a degree of regulatory confusion about the difference between a suitable recommendation and a best interest recommendation. There are many examples in disciplinary actions and published statements where insurance regulators, often at the commissioner level, have used those terms and phrases interchangeably and therefore, in my opinion, inaccurately. NY now intends to make it accurate. And apply this new concept of suitability to life insurance. 

So, what does “best interest of the consumer” mean in NY’s suitability proposal?

First, it is transactional, which makes more sense in the context of insurance than the relationship-based concept of the DOL fiduciary rule. A transaction is “any purchase, replacement, modification, or election of a contractual provision with respect to a proposed or in-force policy.” Note the inclusion of “election of a contractual provision”, which would typically be post-issue.

There must be a recommendation. Recommendation is defined as “one or more statements or acts…to a consumer” by a producer or insurer if there is no producer involved. The statements or acts “reasonably may be interpreted as advice” and the consumer enters into or refrains from entering into a transaction. Finally, there is an intent element to the definition. The recommendation must include an intent by the producer/insurer, which is interesting, especially when we are talking about an insurer. Is it possible for a corporate entity to have an intent? (They can make campaign contributions as people, after all.) Are sales goals the same as intent?

In all states plus in the federal securities suitability standards, there are 12 factors to be considered, but NY is proposing to add a lucky 13th: “Tolerance of non-guaranteed elements in the policy, including variability in premium, cash value, death benefit or fees.”  They also modify the wording of some of the other 12 as well to make some policy features explicit suitability factors. Very significantly, the definition of “suitable” also requires consideration of “all available products, services, and transactions.” What is meant by “available?” What the producer is licensed/appointed to sell? What is available anywhere by anyone with an appropriate license? How can a producer consider products that they do not sell with the level of diligence apparently required by the regulation?

A producer/insurer acts in the consumer’s best interest under this proposal when the recommendation reflects due care and skill and is based on an evaluation of the suitability information provided and is made “without regard to the financial or other interests of the producer, insurer, or any other party.” The consumer must have been “reasonably informed” of the features of the product – whether favorable or unfavorable. In addition, the consumer has to have been informed of the producer’s compensation, which is not really a new requirement since Reg 194 has required notification for several years now. The producer/insurer must determine that the consumer would benefit from features in the policy (which includes both life insurance and annuities).

In addition to these best interest/suitability standards, a few additional rules are incorporated.  The producer cannot “state or imply to the consumer that a recommendation to enter into a transaction is part of financial planning, financial advice, investment management or related services unless the producer has a specific certification or professional designation in that area.” That seems more than reasonable when it comes to financial planning and investment management. However, isn’t any recommendation covered by this regulation financial advice? What certification or designation is contemplated for that element of this prohibition? 

The regulation also states that it applies to “every producer in the transaction, regardless of whether the producer has had any direct contact with the consumer.” This seems to be a warning to general agents and IMOs that they need to be very careful in this regard and have good oversight in place to make sure that they are not inadvertently brought into a violation because of an override payment on a sale that was not suitable.

Insurers are required not only to have policies and procedures around suitability and the implementation of the above rules, but also, they must establish procedures “designed to prevent financial exploitation and abuse.”

Finally, in contrast with the DOL rule, this proposal specifically endorses commission sales as consistent with both the suitable and best interest standard. It states: “Nothing in this Part shall be construed to prohibit the payment to a producer of any type or amount of compensation otherwise permitted under the Insurance Law.”  That is consistent with the DFS position that the compensation limits set forth in §4228 are reasonable. 

This proposal is currently in the public comment period.

We have had conversations with clients about making comments on their behalf. If you are interested in discussing this proposal and how it might impact your company, please contact me at 518-692-2494 or We will also be discussing this in more detail at our upcoming symposium on February 6 in Irvine, CA