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New York State Expands Regulations for Fiduciaries

Dec 3, 2018 2:04:10 PM

Change is coming from coast to coast following the precedent set by the New York State Department of Financial Services (DFS) in July. Are you prepared for the inevitable ripple effect throughout the rest of the US?

What do these enhanced regulations look like?

As of July 17, 2018, Superintendent Maria T. Vullo of the New York DFS released the details of their new regulations for financial services providers. These new regulations entail a “best interest” standard for those licensed to sell life insurance to protect New York State consumers from conflicted advice. The new regulation requires “insurers to establish standards and procedures to supervise recommendations by agents and brokers to consumers with respect to life insurance policies issued in New York State so that any transaction with respect to those policies is in the best interest of the consumer and appropriately addresses the insurance needs and financial objectives of the consumer at the time of the transaction,” according to Section (b) of the First Amendment to 11 NYCRR 224.

You can read the 13-page amendment on the DFS website, but here’s the gist: New York wants to protect its consumers by demanding that financial services providers follow customary best practices to ensure that policyowners’ best interests remain intact. Rather than offering advice based on producers’ financial incentives, providers must adhere to a higher standard of care, recommending insurance and annuity products solely because they are in the client’s best interests.

Change is already on its way. How can you become compliant ahead of time?

Even if you don’t work or reside in the state of New York, these regulations will still ultimately impact the way you do business. The world moves fast, especially when it’s following New York’s lead. With an in force policy management tool, like Proformex, you can propel yourself forward and stay ahead of the curve. Today’s preparation is tomorrow’s guaranteed compliance.

If you’re looking for ways to simplify the complexities of becoming compliant with these regulations, there are a few key factors to consider when evaluating a potential solution:

  • Automation. If your solution isn’t automated, then it’s subject to human error. As regulations become more and more absolute, you simply can’t allow yourself any margin for error. Eliminating manual work and replacing it with scrupulous, principled processes helps to guarantee that nothing slips through the cracks.
  • Monitoring and evaluations. When it comes to life insurance policy maintenance, it’s anything but set it and forget it. Each individual policy in your care requires varying levels of attention and due diligence to ensure it continuously performs as expected. But with all the nuances and specific performance criteria that gets defined on a case-by-case basis, it’s utterly impossible to manually manage 24/7, 365. You need a platform that can monitor performance for you and evaluate alternatives in the case that a policy is no longer performing as intended. Having such a monitoring tool serves to protect you and reduce your liability as a fiduciary.
  • Secure data aggregation. Make sure the solution you choose can safeguard your client’s sensitive data. While it’s convenient to keep all relevant documentation and contracts in one place, you need to be confident that the repository for said documents will keep the policies, annual statements, in force illustrations and all other policy-related materials safely archived and easily accessible. It may sound like a paradox, but it is possible to achieve both.
  • Reminders and alerts. Additionally, you’ll want a solution that will automatically generate alerts and reminders to help keep you on track. Simply monitoring and evaluating won’t be enough; you’re going to need to know right away when something doesn’t seem right so that you can quickly take action to amend the situation.
  • Reporting. Lastly, you’ll want to consider reporting capabilities. Manually compiling performance reports is tedious and time-consuming. Look for a solution that will review all relevant data points and aggregate them into one client-ready report on a regular basis for you, saving you the time and hassle of having to develop it yourself.

The bottom line?

Don’t wait until these elevated standards like the ones in New York become final regulation in your state. Discover how in force policy management platforms, like Proformex, can save you time and money by leveraging technology and automation for better management, oversight and visibility into life insurance policy performance.

About Proformex

Headquartered in Cleveland, Ohio and founded in 2016, Proformex is the provider of on-demand, SaaS solutions to life insurance policy owners, beneficiaries, insurance agents and fiduciaries. Designed to proactively alert customers of potential problems with their life insurance policies, Proformex protects policies against lapsing, degradation and asset erosion. By monitoring five key contract parameters – lapse age, death benefit, premium, crediting rate and Comdex – Proformex offers better portfolio oversight and control.

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David Morris

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