Empire State Bans Guaranty Ads, Divorce Insurance

New York regulators have blocked producers from mentioning guaranty fund protection in ads and also blocked insurers from insuring couples' retirement arrangements against marital discord.

The New York State Insurance Department general counsel's office addresses the guaranty fund issue in Office of the General Counsel Opinion Number 09-01-12.

A member of the public asked the office, "May a life insurance agent or broker, in soliciting structured settlement annuities, lawfully use a brochure published by a trade association that states that 'state insurance guaranty associations provide an additional level of protection for future structured settlement recipients'?"

A producer cannot use a brochure that refers to the Life Insurance Guaranty Corp. of New York, officials write in the opinion.

New York state insurance law "broadly prohibits any person from using the existence of the LIGCNY for the purpose of selling, soliciting, or inducing the purchase of annuity contracts," officials write.

An insurer can respond directly to a policyholder upon written request and on a form prepared by the corporation and approved by the state insurance superintendent, officials write.

A copy of the guaranty fund reference opinion is available here.

In a separate opinion, OGC Opinion Number. 09-01-07, officials respond to this question: "May an insurer market in New York a policy intended to protect the value of a retirement account in the event of divorce?"

The company that presented the question also asked whether the policy could be treated as if it were salary protection insurance or involuntary unemployment insurance, which are products that can be sold in New York.

The proposed product, a "retirement asset protection policy," would insure an asset manager against drops in the value of an individual retirement account or blocks of retirement plan business that might result from divorce.

An insurer cannot sell such a product in New York state, officials write in the response.

"The proposed product would constitute a kind of insurance that may not be written in New York," officials write.

The product does not resemble unemployment or salary protection insurance, and it might be an impermissible form of group coverage, officials write.

The divorce insurance opinion is available here.