New York's Regulation 187 sets a best-interest standard for recommendations of life insurance and annuities. It applies to the insurance producer who makes the recommendation and to the insurer. I completed the New York approved training on the regulation this October, and I want to explain in ordinary terms what it changes for a buyer.
The standard
A recommendation has to be in the best interest of the consumer. The producer may not place their own financial interest, or the insurer's, ahead of the consumer's. Best interest is judged against what the consumer has said about their needs, their finances and their goals at the time of the recommendation.
What a producer has to do
A producer has to make a reasonable effort to understand the consumer's situation, including insurance needs, financial circumstances and objectives. The recommendation needs a reasonable basis in that information. The producer also has to disclose the material facts about the relationship, including how they are paid, before making the recommendation.
What this means for you
Expect to be asked about your income, your dependents, your existing coverage and what you want the policy to accomplish. A good conversation should end with you understanding why one product was suggested over the alternatives and what the producer earns if you buy it. If you do not understand either of those, ask before you sign.
This article is general information, not advice for your situation, and it is not a substitute for the regulation itself. You can read the regulation on the New York Department of Financial Services website and verify any producer's license there.
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