A opinion issued January 26, 2009 by the Office of General Counsel of the New York State Insurance Department finds that a statement that "state insurance guaranty funds provide additional level of protection for future structured settlement recipients", which is aimed at New York residents, runs afoul of the Insurance Law".
The opinion was sought by this author with a focus on the blue highlighted text, after he learned that the NSSTA produced and distributed a financial handout in October 2008 that included:
"State insurance guaranty associations provide an additional level of protection for future structured settlement recipients. In that respect, they serve a similar purpose as the Federal Deposit Insurance Corporation (FDIC). If an insurance company becomes financially impaired, state guaranty associations can provide continuing payments, subject to certain limits, or work with regulators to transfer annuity obligations to a more financially sound insurer".
It was this author's opinion that prospective use in solicitation of such freely downloadable handout (that is still available from the NSSTA website), might present a compliance issue for structured settlement brokers, structured settlement agents and settlement planners. This author strongly expressed this concern to the NSSTA in October 2008. Not satisfied with the response he informed NSSTA that he was independently seeking an opinion from the New York State Insurance Department OGC. This author's valid concern is now underscored by the OGC opinion that has has been returned.
The State of New York Insurance Department's opinion is:
" Insurance Law Sec 7718 broadly prohibits any person from using the existence of the LIGCNY for the purpose of sales, solicitation or inducement to purchase annuity contracts, including structured settlement annuity contracts, However, the statute has no application to 1) the LIGCNY itself; 2) any other entity that does not sell or solicit insurance; or 3) an insurer that responds directly to a policyholder upon written request and on a form prepared by the corporation and approved by the Superintendent.
Life insurance agents and brokers clearly come within the scope of the prohibition contained in Insurance Law 7718. The fact that the statement "state insurance guaranty funds provide additional level of protection for future structured settlement recipients" is general in nature, and does not specifically reference the LIGCNY is irrelevant. When the statement is directed at New York residents, whose only coverage is from the LIGCNY if a life insurer fails its obligations, it is an implied reference to LIGCNY, and thus prohibited by Insurance Law 7718 in the absence of any statute's express exceptions. And based on the facts presented, none of the exceptions is applicable here"
This author believes that many other states have similar rules to New York. Check your marketing materials and your local state rules.