July 17, 2023
SUPERINTENDENT ADRIENNE A. HARRIS COMBATS DISCRIMINATION BY LIFE INSURANCE COMPANIES THAT OFFER MULTIPLE VERSIONS OF THE SAME PRODUCT
CIRCULAR LETTER ADDRESSES PRACTICES THAT CAN RESULT IN LESS-FAVORABLE VERSIONS OF PRODUCTS BEING MADE AVAILABLE TO LOW-INCOME AND MINORITY CONSUMERS
Today, New York Department of Financial Services (“DFS”) Superintendent Adrienne A. Harris issued a new circular letter to life insurance companies prohibiting discrimination by offering multiple versions of the same product.
Life insurance can be purchased by consumers through many different channels, such as independent insurance agents, company-affiliated agents, banks, or registered investment advisors. The Department became aware through review of insurance product filings that insurance companies were offering different benefits or cost structures of the same product within the same sales channels. Low-income households, consumers of color, and New Yorkers living upstate should not be offered products with less favorable terms depending on the channel through which they purchased life insurance.
"Insurers have a responsibility to ensure fairness and transparency in their products, and discrimination against consumers based on factors such as gender or ethnicity is against the law,” said Superintendent Harris. “The complexity of insurance products should not be used to exploit vulnerable groups, and insurers must provide equitable access to products for all, without prejudice or bias.”
The guidance reiterates the Department’s expectation that all consumers with similar needs, goals, or circumstances and expectation of life should have access to the same version of products. Insurers can sell different versions of a product to a limited class of consumers only when they can demonstrate a distinction that is reasonable, equitable, not unfairly discriminatory, and that is based on sound actuarial principles. The Department further advises that it is not sufficient to rely on a disclosure document telling consumers that they may compare their life insurance product to other products offered when most consumers will not or cannot make that comparison due to the complexity of the products.
The circular letter also advises insurers that the Department will inquire about compliance with the nondiscrimination provisions of the insurance law as part of the policy form approval process.
For a copy of the Circular Letter please visit here.