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?
Under New York Regulation 187, what must a producer disclose when recommending an annuity?