Key Takeaways
- New York requires a 10-day free look period for annuity contracts (may be longer for seniors)
- Regulation 187 requires producers to act in the best interest of consumers when selling annuities
- New York has a suitability standard that exceeds federal requirements
- Annuity replacements require detailed comparison and disclosure of surrender charges
- New York limits surrender charge periods and requires clear disclosure
New York Annuity Regulations
New York has adopted comprehensive annuity regulations to protect consumers. Regulation 187, effective since 2019, established a best interest standard that exceeds many other states.
Free Look Period
New York provides a 10-day free look period for annuity contracts:
- Applies to all annuity types (fixed, variable, indexed)
- Buyer can return for full premium refund
- No penalty for exercising free look
- Period begins when policy is delivered
- May be extended for senior citizens
Regulation 187 - Best Interest Standard
New York's Regulation 187 requires producers to act in the best interest of the consumer:
Key Requirements
- Best Interest Obligation - Recommendation must be in consumer's best interest at time of transaction
- Care Obligation - Exercise reasonable diligence, care, and skill
- Disclosure Obligation - Provide meaningful disclosure of material conflicts of interest
- Documentation - Maintain records demonstrating compliance
Producer Duties Under Reg 187
Before recommending an annuity, the producer must:
- Know your customer - Obtain and evaluate relevant information
- Know your product - Understand all material features
- Make suitable recommendations - Match products to customer needs
- Disclose conflicts - Reveal compensation and material conflicts
Required Information to Gather
| Category | Information Required |
|---|---|
| Financial Status | Income, assets, liabilities, liquidity needs |
| Tax Status | Tax bracket, qualified vs. non-qualified funds |
| Investment Objectives | Goals, time horizon, risk tolerance |
| Existing Coverage | Current annuities and life insurance |
| Financial Experience | Investment knowledge and sophistication |
Suitability Requirements
New York requires thorough suitability analysis:
Suitability Factors
| Factor | Consideration |
|---|---|
| Age | Is surrender period appropriate for age? |
| Income | Can client afford premiums? |
| Liquidity | Does client need access to funds? |
| Risk Tolerance | Is product risk appropriate? |
| Tax Situation | Are tax benefits relevant? |
| Existing Coverage | Is additional annuity needed? |
Documentation Requirements
- Written record of information gathered
- Analysis of why product is suitable
- Disclosure of material conflicts
- Client acknowledgment of recommendations
Exam Tip: Regulation 187 requires acting in the consumer's best interest, not just making suitable recommendations. This is a higher standard than traditional suitability.
Surrender Charge Requirements
New York regulates surrender charges on annuities:
| Requirement | Standard |
|---|---|
| Clear Disclosure | Must explain in plain language |
| Reasonable Period | Cannot be excessive |
| Free Withdrawal | Must allow some penalty-free access |
| Schedule Provided | Surrender charge schedule in writing |
Replacement Requirements
When replacing an existing annuity, producers must:
Required Documentation
- Comparison statement - Side-by-side comparison of old and new contract
- Replacement form - Signed acknowledgment of replacement
- Suitability analysis - Why replacement is in client's best interest
- Disclosure of costs - All costs including new surrender charges
Red Flags for Replacement
DFS scrutinizes replacements for:
- Short holding periods before replacement
- Surrender charges not fully explained
- New surrender charge period starting over
- Compensation-motivated churning
What standard does New York Regulation 187 require for annuity sales?
What is the free look period for annuity contracts in New York?