BILL NUMBER: S7222A
SPONSOR: BAILEY
 
TITLE OF BILL:
An act to amend the insurance law, in relation to indexing fixed amounts
and clarifying compliance
 
PURPOSE OR GENERAL IDEA OF BILL:
This bill would modernize the Insurance Law by updating fixed amounts in
the statute to account for inflation since the statute's enactment,
adjusting eligibility for certain subsidies to account for the subse-
quent enactment of various states' salary history ban laws, and clarify-
ing a number of compliance-related provisions.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 amends section 4228 of the insurance law to clarify what
should be included in the calculation of total selling expenses.
Section 2 amends Section 4228 of the insurance law to clarify the 25
percent limit on compensation for life insurance sales.
Section 3 amends Section 4228 of the insurance law to modernize the way
in which eligibility for agent training allowance subsidies is deter-
mined.
Section 4 amends Section 4228 of the insurance law to update the statu-
tory limits on awards and prizes to reflect inflation.
Section 5 amends Section 4228 of the insurance law to clarify that
reporting to DFS should be in aggregate.
Section 6 amends Section 4228 of the insurance law to provide insurers
with additional time to recover overpayments and removes the requirement
to notify DFS.
 
JUSTIFICATION:
New York's Insurance Law puts limits on commissions to agents, non-cash
compensation, and selling expenses that insurance companies can incur
when selling life insurance and annuities. The statute also includes
fixed limits on prior income a candidate may have earned to be eligible
for new agent training subsidies. Over time, those monetary limits have
become outdated and no longer serve their intended purpose, as they have
lost approximately half their value due to inflation. This bill would
update the limits.
The bill also adjusts the eligibility requirements for new agents to
receive training allowance subsidies. Since the statute's enactment, a
growing number of states have enacted salary history ban laws, which
prohibit companies from inquiring into an applicant's former salary. In
these states, insurance companies cannot comply with both the eligibil-
ity requirement of section 4228 and the state's salary history ban law.
This adjustment to eligibility requirements will benefit the public by
making it easier for candidates to apply for and become insurance
agents, increasing employment opportunities as well as expanding the
ranks of insurance agents who can serve a public need.
The bill also clarifies the definition of selling expenses to ensure
that insurers have clear compliance guidelines, making it easier for
them to support their agents. The current definition of "total selling
expenses" includes non-exhaustive examples and vague terms, making it
difficult to administer with certainty. To the extent that
Section 4228 puts limits on "total selling expenses," these should be
limited to commission, other forms of agent compensation, or proxies for
these items, i.e., items that would normally be part of the agent's
overhead but for the issuer defraying the expense. In contrast, items
such as direct solicitation advertising, illustrations, and advanced
underwriting support are items that an issuer should supply on its own
account with respect to its own products. These are not items that would
otherwise be part of an agent's overhead expenses. Likewise, certain
sales conferences and training meetings advertising the issuer's
products would normally be understood to be part of the issuer's over-
head and would not be expenses the agent would otherwise occur on their
own account.
Lastly, Section 4228 requires insurers to file annual reports with the
Department of Financial Services (DFS) and to demonstrate that their
agent compensation plans comply with the statute's payment limits.
These annual reports include statements of self-support for each life
insurance policy; self-support meaning that the premium charged for a
life insurance policy or annuity is able to cover its expenses, with the
assumptions used to demonstrate self-support being based on reasonable
actuarial assumptions about interest, mortality, taxes, and other
factors. This bill clarifies what insurers are required to test and file
with DFS, and that filing requirements apply to both new and changes to
in-force compensation.
 
PRIOR LEGISLATIVE HISTORY:
New bill.
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
Immediately.

Statutes affected:
S7222: 4228 insurance law, 4228(b) insurance law, 4228(e) insurance law, 4228(f) insurance law
S7222A: 4228 insurance law, 4228(e) insurance law, 4228(f) insurance law