Financial Security

Lessons We Can Learn From New York

A wake up call on financial security

by Melissa Bova

Melissa Bova joined the Finseca Government Affairs team in November 2021 as its first Vice President of State Affairs. Her role is to help Finseca members better engage and advocate for the profession and financial security for all with state policymakers.

When a notable decrease in interest and uptake of life insurance applications occurs among individuals aged 50 and older, it marks an unforeseen shift that is capturing the attention of the entire insurance industry. Even more, this demographic’s decrease in activity sheds light on the pressing need for a holistic financial plan. This data should serve as a wake-up call to reevaluate the evolving financial needs and priorities to provide even more financial security for those in their golden years.

At Finseca, our mission is unequivocally embedded in our very name: “FINancial SECurity for All.” This powerful and purpose-driven mission encapsulates our commitment to ensuring that financial security is not a privilege reserved for a select few but a reality that extends to every individual and family, regardless of their age or circumstances. And that’s why the significance of our focus on New York’s Regulation 187 lies in its substantial impact on consumers seeking broader access to financial products and a more comprehensive array of choices in the insurance market. As the data clearly indicates, this regulation has presented several challenges and obstacles for consumers, raising concerns about its overall effectiveness.

Ensuring that individuals are protected from exploitative practices and that their best interests are placed at the forefront is essential for building trust and maintaining the integrity of financial advice. However, striking the right balance between consumer protection and access to advice is a nuanced task that requires ongoing dialogue, smart regulations, and a commitment to achieving the best outcomes for all parties involved.

Regulation 187

Regulation 187, intended to promote consumer protection and ensure financial advice aligns with the client’s best interests, has encountered significant criticism due to its unintended consequences. While the underlying goal of safeguarding consumers is undoubtedly commendable, the manner in which this regulation has been implemented has raised legitimate concerns.

One of the most striking indicators of Regulation 187’s effects is the decline in the number of individuals covered by individual life insurance in New York. The statistics paint a concerning picture as recently laid out in Life Annuity Specialist, “…New York’s Regulation 187 has added unnecessary time and cost to the life application process. It could also be depressing sales.” For example, we’ve seen a decline in the number of people covered by individual life insurance. In 2021, the policy count in the state stood at 362,207, down 15 percent from the 2018 total, the year before the rule took effect. But, over the same period, the policy count nationally increased by 3 percent. The notable decline in the number of individuals covered by individual life insurance policies in New York is a matter of significant concern, and it raises important questions about both the accessibility and affordability of life insurance within the state.

The feedback from advisors on the challenges posed by New York’s Regulation 187 stresses the significant impact this regulation has had on their ability to serve their clients effectively. For example, Bob Eichler, an advisor at CCL Financial Group, has said, “My concern is that the process keeps people from acquiring the coverage that they should have. If you’re planning on having to complete 100 pages of an application, that just tends to make them procrastinate even longer.” And Ben Kronish, an advisor at PartnersFinancial and the insurance broker and consultant NFP, has publicly noted: “When you add the additional requirement that regulation 187 imposes, it just becomes a reason to look to do business outside of the state.”

Ensuring that individuals are protected from exploitative practices and that their best interests are placed at the forefront is essential for building trust and maintaining the integrity of financial advice...

Commitment To Prioritizing Consumers’ Best Interests

The commitment to prioritizing consumers’ genuine best interests is a commendable objective, one that should be within reach for our financial security profession. Recent developments at the congressional level, such as Secure 2.0, the Security & Exchange Commission’s (SEC) Reg. BI and the ongoing adoption of the NAIC Best Interest model, offer promising steps forward in this direction. These initiatives are key to ensuring that middle-income savers have access to the financial advice and tools they require to attain financial security, encompassing essential aspects like life insurance, investments, and annuities.

The numbers speak to the urgency of this mission. With approximately 60 million American households lacking or having insufficient life insurance coverage, there is a substantial portion of the population that remains vulnerable and unprotected against financial uncertainty and life’s unexpected challenges. These individuals and families are often without a reliable financial security plan, which can make them susceptible to unforeseen financial hardships.

Compounding this issue is the staggering $12 trillion protection gap, signifying the vast unmet need for adequate insurance coverage across the nation. Bridging this gap is an essential task, not only for the stability and well-being of individuals and families but also for the overall economic security of the country.

A Noble Objective

At Finseca, our unwavering focus is on ensuring that consumers have enhanced access and a more extensive array of choices in the financial services they rely on. This means striving to make financial advice and suitable products available to everyone, regardless of their income level or background. It’s our commitment to extending the benefits of financial security to millions who currently lack it.

Again, the noble objective of genuinely prioritizing consumers’ best interests is not only commendable but also a realistic and achievable goal. The collaborative efforts of regulatory bodies, industry stakeholders, and consumer advocates can pave the way for a financial landscape where everyone, regardless of their background or income level, has the opportunity to take charge of their financial well-being. This is a critical step toward not only safeguarding individual financial futures but also strengthening the overall economic resilience of the nation.

Together, we can work towards ensuring that all Americans have the opportunity to safeguard their financial future and bridge the protection gap that currently leaves so many vulnerable.


One response to “Lessons We Can Learn From New York”

  1. Dave Mirabito says:

    I would love to see a comparison of the typical whole life policy sold by MassMutual, for example, compared to the typical non-commission WL or even guaranteed UL plus whatever the advisor would charge to initiate and monitor the policy. I bet it comes fairly close to similar cost and similar benefit, if the MassMutual policy doesn’t outperform.
    You can substitute NY Life, Guardian or Northwestern for the same comparison.