The Office of General Counsel issued the following informal opinion on November 21, 2000, representing the position of the New York State Insurance Department.

Re: Sales Illustrations, Regulation 60 (N.Y. Comp. R. & Regs., tit. 11, §51 et seq.)

Issue Presented

Must applicable fees and charges be included in any illustration provided pursuant to New York Replacement Regulation 60, N.Y. Comp. R. & Regs., tit. 11, § 51.1 et seq.?




The inquirer stated that some competitors were not including applicable fees and charges, particularly mortality & risk, as well as and surrender charges, with respect to annuities. The inquirer believed that inclusion of these items was necessary to have a meaningful comparison. Accordingly, the inquirer sought confirmation that this Department agreed with the conclusion that "Regulation 60 requires the inclusion of all fees and charges in the illustration".


Regulation 60 was promulgated, N.Y. Comp. R. & Regs., tit. 11, § 51.1(b) (1998):

To protect the interest of the public by establishing minimum standards of conduct to be observed in the replacement or proposed replacement of life insurance policies and annuity contracts; by making available full and clear information on which an applicant for life insurance or annuities can make a decision in his own best interest; by reducing the opportunity for misrepresentation and incomplete comparison in replacement situations (commonly referred to as twisting); and by precluding unfair methods of competition and unfair practices.

Life insurance agents are required, where a replacement is likely, N.Y. Comp. R. & Regs., tit. 11, § 51.5(c)(3), to:

Present to the applicant, not later than at the time the applicant signs the application, the ‘IMPORTANT Notice Regarding Replacement or Change of Life Insurance Policies or Annuity Contracts’ and a completed ‘Disclosure Statement’ signed by the agent in the form prescribed by the Superintendent of Insurance and leave copies of such forms with the applicant for his or her records; …

Insurers are required, where a replacement is likely, N.Y. Comp. R. & Regs., tit. 11, § 51.6(b)(2), to:

Require with or as part of each application a copy of any proposal, including the sales material used in the sale of the proposed life insurance policy or annuity contract, and proof of receipt by the applicant of the ‘IMPORTANT Notice Regarding Replacement or Change of Life Insurance Policies or Annuity Contracts’ and the completed ‘Disclosure Statement’; … .

New York Insurance Law § 3209 (McKinney 2000) establishes disclosure requirements in the solicitation of life insurance and annuities. The interstices in the general requirements of New York Insurance Law § 3209 have been filled in by Regulation 74, N.Y. Comp. R. & Regs., tit, 11, § 53 et seq., which is intended, N.Y. Comp. R. & Regs., tit. 11, §53-1.1(a):

to establish rules for the content and format of sales illustrations for life insurance policies, annuity contracts, variable life insurance policies, variable annuity contracts and individual funding agreements in accordance with Section 3209(k) of the Insurance Law; …

Further, New York Insurance Law 4226(a) (McKinney 2000) provides, in pertinent part:

No insurer authorized to do in this state the business of life, or accident and health insurance, or to make annuity contracts shall: … (5) make or deliver to any person or persons any incomplete comparison of any such policies or contracts for the purpose of inducing, or tending to induce, such person or persons to lapse, forfeit or surrender any insurance policy or contract. (6) replace the individual life insurance policies or individual annuity contracts of an insurer by the same or different insurer without conforming to the standards promulgated by regulation by the superintendent. …

The foregoing is only a partial indication of the disclosure and illustration requirements applicable to the sale of life insurance and annuities. It is the position of this Department, however, that even in the absence of a specific requirement, in order for a life insurer or life insurance agent to be in compliance with Regulation 60, the insurer or agent must present all illustrations that are necessary to provide a full and complete picture of the proposed product.

Under the circumstances surrounding the sale of sophisticated products, where the fees and charges may be a significant factor in a determination by a client to purchase a product, and possibly replace another product; the illustration of applicable fees and charges could be an essential element in the Regulation 60 disclosure. In addition, the Securities & Exchange Commission commented, when this Department was revising Regulation 60 in 1997, that it regarded the illustration of applicable fees and charges desirable so that the insured could ascertain that the applicable fees and charges were not excessive, 15 U.S.C.A. §80a-26(e)(2)(A) (West 2000).

This Department is aware that the Disclosure Statements established by the Superintendent of Insurance, N.Y. Comp. R. & Regs., tit. 11, Appendices 10A and 10B, do not specifically provide space for information concerning any applicable charges and fees. The Disclosure Statements do, however, contain a space for remarks, which may be utilized by the agent to describe applicable charges and fees. Further, the Regulation’s Disclosure Forms contemplate that illustrations will be deemed incorporated therein, providing a space where the presence of such illustrations may be indicated.

Information concerning insurers and agents that may not be in compliance with Regulation 60 may be sent to:

Salvatore Castiglione
Consumer Services Bureau
New York State Insurance Department
Agency Building One
Empire State Plaza
Albany, NY 12257.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.