Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, July 31, 2019

Life Insurance Developments and How to Protect the Insured

Life_InsuranceLawrence J. Rybka recently authored an article entitled Life Insurance in the Client's Best Interest. Here is the introduction to his article:

Life insurance is a unique and important financial product for many clients and the only product that can protect clients’ families and businesses against the risk of early death. Properly designed life contracts
also allow the client to benefit from some unique tax benefits afforded only to life insurance products.
But standards for life insurance advice have not kept pace with the marked increase in types of life products or the complexity of these products. Most state insurance regulators have not modernized consumer protections or duties to clients to keep pace with protections offered by banking regulation, securities laws, trust laws or pension laws where greater duties are owed to clients both when a recommendation is made and on an ongoing basis. Many complex modern life products involve important tradeoffs that are not well understood by consumers or perhaps by most agents who sell them. Nor is there any ongoing requirement to monitor and advise the client after the product is placed. This white paper will explore how two upcoming changes may bring life insurance standards into the modern era.

There are two important developments in 2019 that will impact the standard by which life insurance recommendations are made to clients. The first was the CFP Board’s change in their Code of Ethics and Standards of Conduct (“Code and Standards”). The new standards now extend to any financial advice including all life insurance recommendations. These recommendations must now be in the client’s best interest and advice about them offered under a fiduciary standard.

The second change is a regulation by the State of New York, Regulation 187,1 that takes effect on February 1, 2020, for a recommendation to purchase life insurance products and August 1, 2019, for annuity products sold in the state. This regulation requires agents and insurance companies to make life insurance recommendations that are both suitable for the client and in the client’s best interests. Both new standards change how advisors will need to document life insurance recommendations and substantially raise the standard for life insurance advice. This white paper will explore what it means to make a life insurance recommendation either as a CFP® under the new standards or under New York’s best interest standard.

Follow this link to read this interesting article: Download Life_Insurance_In_the_Client's_Best_Interest.


Articles, Non-Probate Assets | Permalink


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