Indexes fixed amounts and clarifies compliance for life insurance and annuity businesses; repealer

Showing the cosponsors who are on Agora, A to Z. The official record may list more.

• Democratic4

Shown in neutral colors by design; Agora is non-partisan.

◆ The sponsor's argument

Why Jamaal Bailey says this is needed

This legislation builds on important steps taken to modernize Insurance Law Section 4228 in 2025. Section 4228 is significant to New York-li- censed life insurers because it is extraterritorial; that is, it applies to policies sold outside this state involving nonresidents of this state. The result, therefore, is that it limits the amount of agent compensation that may be paid on sales of individual life insurance and annuity business regardless of where in the country that business is sold. New York Insurance Law places limits on training allowance subsidies and on prizes and awards for agents and brokers that are paid for by insur- ance companies. Training allowance subsidies allow life insurers to provide financial support to agents while they are learning the business and building their client base. Under the statute, those subsidies may be paid for four years, after which agent compensation is based solely on commissions. This bill would allow those limits to be adjusted annually based on the same percentage used for the state minimum wage. Over time, the statuto- ry limits have become outdated and no longer serve their intended purpose because they have lost approximately half their value due to inflation. The Department of Financial Services has increased the limits only three times in the past 17 years, one of which resulted from legis- lation enacted in 2025. This bill would resolve that issue on a perma- nent basis and provide new agents and insurers with greater certainty going forward. In addition, this bill would allow insurance companies to make changes to in-force compensation plans. There is a strong public policy basis for permitting increased agent compensation on older policies that were originally filed, years ago, without a renewal commission. Encouraging improved agent servicing of older policies is in the best interests of existing policyholders and helps ensure that their insurance needs continue to be met. The proposed amendment would specifically authorize an insurer to provide an agent with a renewal commission and would require the insurer to file the amended compensation plan with the Department in accordance with the same requirements that apply to a newly filed product. This bill also modernizes the Insurance Law by eliminating subsection (g), which applied only during the four years following its enactment in 1998. In addition, the bill eliminates one of the many filings currently required by Section 4228 because that filing provides little, if any, value in comparison with the effort required to produce it. Finally, in addition to several definitional changes made in 2025, this bill further clarifies what constitutes total selling expenses. Remov- ing language such as "including but not limited to" reduces the number of subjective determinations insurers must make (which supports compli- ance) and ensures consistent application among insurers. The bill also specifically excludes from total selling expenses any annual marketing or distribution fees on a mutual fund, or any portion thereof, received by the insurer pursuant to Rule 12b-1 under the Investment Company Act of 1940 (17 C.F.R. Sec. 270.12b-1), which is then paid by the insurer to the agent or broker. This language is intended to correct a long- standing misinterpretation of the law: 12b-1 fees are not paid by the insurance company and are not controlled by the insurance company, so they should not be classified as selling expenses of the insurance company.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.