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March 30, 2009

Can Your Agent Legally Yap Up State Insurance Guaranty Funds in Insurance Sales Pitches?

Is there a change in New York State law afoot on the use of the state guarantee fund by an agent in a sales situation?

Link to January 26, 2009 New York State Insurance Department Office of General Counsel (OGC) and our post of January 29, 2009, click here. This opinion letter was published by the OGC in January 2009 and that spot is now blank

NSSTA reported to its members that at National Association of Insurance Commissioners (NAIC) Spring 2009 National Meeting, the Annuity Disclosures Working Group of the Life Insurance and Annuities (A) Committee began considering a proposal by its Chairman, Jim Mumford of the Iowa Insurance Division, to develop "guidelines . . . for more specific disclosure of guaranty fund coverage and limits thereon" that could be made available prior to delivery of an annuity contract. As an active participant in the 2008 NAIC Advisory Group on Structured Settlements in the Insolvency Context, NSSTA reported to its members that Jim Mumford is familiar with structured settlements and the importance of Guaranty Association coverage as a safeguard for structured settlement payees.

NSSTA indicated to its members that it has submitted a comment letter supporting Chairman Mumford's proposal and agreeing that structured settlement professionals should not be prevented from giving settling claimants the information necessary to make informed decisions about the comparative risks of annuity contracts and other financial products.

There has been no announcement about whether or not such rules have been eased specifically for structured settlement solicitors or for all life insurance and annuity transactions or any indication that NSSTA contacted the New York State Insurance Department to have the opinion removed pending the outcome of the NAIC working group.

This author supports NSSTA's move and what appears to be the intended result (provide a measure of confidence as did the FDIC when it increased its limits to $250,000 through 12/31/2009), provided such result, if achieved, IS NOT used as a hammer to force plaintiffs into any annuity issuer with shaky financials up to the limits of a guaranty fund and deny diversification where prudent. Given the veritable "tin cup" funding status that is most state guarantee funds I don't think it serves the interest of plaintiffs to have the potential for irresponsible agents or consultants implying that the "safety net" is "just like the FDIC", UNLESS it really is.

How Big Is The Tin Cup?  March 16, 2009

Stay tuned!


Posted at 07:38 PM in Article 77 New York Insurance Law, NAIC, National Structured Settlement Trade Association, New York State Insurance Law, New York Structured Settlements, NSSTA, Standard of Care Structured Settlements, State Insurance Guarantee Funds |

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Guide to Structured Settlements 2024

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Structured Settlement Best Practices Corner

  • New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
  • When it comes to settlement documents it is the ultimate responsibility of the lawyers or claims adjusters who receive input concerning the structured settlement aspects of the documents to actually read the entire document, exercise independent thought and advise their clients properly
  • Be aware that financial advisors use of testimonials is prohibited or restricted
  • Most states require that Testimonials represent the CURRENT opinion of the person who made the testimonial. Be prepared to back it up.
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