New York State Issues New Regulations Regarding Cost of Insurance (COI) Increases

In November of last year we reported on a regulation floated by the New York State Department of Financial Services to “govern life insurance company practices related to increases in the premiums” of life insurance and annuity policies. The goal was to “protect New Yorkers from unjustified life insurance premium increases.”


This week, the department issued their final regulation. According to a press release announcing the new regulation, the department will be able to review cost of insurance, premium or expense increases in life insurance and annuity policies by requiring carriers to notify the department “at least 120 days prior to an adverse change in non-guaranteed elements of an in-force life insurance policy.” In addition, carriers will be required to notify consumers “at least 60 days prior to an adverse change in non-guaranteed elements of an in-force life insurance or annuity policy.”


We have previously reported on life insurance policy COI increases and their effect on policy carrying costs. According to New York Financial Services Superintendent Maria T. Vullo, the new regulation “is designed to protect New Yorkers from unfair and inequitable cost increases in in-force policies.” According to the department, New York law, “prohibits life insurers from changing non-guaranteed elements in a discriminatory way for members of the same class of policyholders . . . only certain enumerated factors, which do not include profit, can be considered when seeking to change non-guaranteed elements.”


There are several COI increase lawsuits working their way through the courts that are focused on the legalities regarding how carriers can increase the cost of insurance on a policy, and whether the increases represent a breach in the insurance contact. One case, settled last week, favored the plaintiffs, andone consolidated case was granted permission to move forward earlier this month. The carriers maintain they have the right to raise COI costs in their policies. A Wall Street Journal article on this subject stated, “insurers maintain they are acting in accordance with policy provisions allowing higher charges up to a maximum amount, based on expectations of future policy performance.”


These final regulations were published after the department reviewed comments submitted when the original proposal was announced. It is not known whether other states will follow suit, but that same Wall Street Journal article noted the regulation “could be widely copied by other insurance departments.”


We will report on any updates as they become available. For a copy of the press release and new regulation, email mbrohawn@itm21st.com.