Relates to indexing fixed amounts and clarifying compliance

• Democratic2
• Republican1

◆ The sponsor's argument

Why Jamaal Bailey says this is needed

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 Over time, those monetary limits have become outdated and no longer serve their intended purpose, as they have lost approximately half their value due to inflation.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.

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.