Guidance for handling Situs for residents of New York
Updated from the Jan. 10, 2022 Lincoln Life Leader
In August 2021, Lincoln Financial Group suspended the sale of several life insurance products, as well as suspended all electronic process solutions, in New York. Our Underwriting and New Business Department is closely monitoring applications for attempts to circumvent these rules by creating the appearance that an application was solicited in a state other than New York.
If any portion of the solicitation or application process occurs in New York, including physical examinations, then the application submitted must be a Lincoln Life & Annuity Company of New York (LLANY) application for an approved product in New York. In other states, life insurance products are issued by The Lincoln National Life Insurance Company (LNL). LNL is not licensed in New York. If LNL were to issue a policy that had been solicited or delivered in New York, the New York Department of Financial Services would view LNL as acting as an unauthorized insurer.
If a New York resident applies for coverage outside of New York, no part of the sale can take place in the State of New York, and all sales activities must be conducted in the state of Situs and the New York resident must sign the Out of State Sale Verification Form. New York residents may only apply in another state if there is an obvious tie to the Situs state other than the reason of purchasing insurance. For examples, please review the Individual Life Situs Guidelines.
Some instances that would be considered soliciting in New York:
- Meeting with applicants in New York
- Completing any portion of an application in New York
- Delivery and/or signing of policies or contracts in New York (traditional or electronic)
- Completion of an exam in New York
- Lack of obvious and reasonable link to the Situs/issue state by the Insured or Owner
- “Dummy applications” for insureds whose primary residence is in New York
- Paperwork or forms that do not match the state of Situs
Should you encounter an applicant who has completed any portion of the application process in New York, then you should ensure the application is submitted as a LLANY application for an approved product in New York that is available for sale. You can check product availability in New York by visiting the Availability Grids linked below. A failure to comply with these requirements may lead to further disciplinary action, up to and including termination for cause.
A Special Note on “Dummy Applications”
We are aware of a practice of some financial professionals to submit a “dummy application” to initiate the
underwriting process. These “dummy applications” typically state that an owner and/or beneficiary of the policy will be determined at a later date. Although the application provides a New York address for the insured, another state may be represented on the signature page as the state where the application was signed. Contrary to such representations, other documentation is received, such as a paramed exam, that indicates portions of the solicitation occurred in New York.
In April 2011, the New York Department of Financial Services issued Circular Letter No. 6, Sale of Unapproved Insurance Policies or Contracts to Residents of New York State. This letter noted that the Department’s findings that “producers submitted applications on behalf of New York residents that falsely stated that the transactions had taken place outside of New York, even though the producers in fact solicited applicants, completed applications, or delivered the policies or contracts in New York.” The Department stated that violations will lead to disciplinary action, which may include monetary penalties, suspension or revocation of the producer’s or insurer’s license.
Effective immediately, Underwriting/New Business will no longer accept “dummy applications” for insureds whose primary residence is in New York. As stated above, if a New York resident applies for coverage outside of New York, no part of the sale can take place in the State of New York, and all sales activities (application, illustration, paramed exam, policy delivery, etc.) must be conducted in the state of Situs and the New York resident must sign the Out of State Sale Verification Form. Continued use of “dummy applications,” or other mechanisms to create the appearance that solicitation is occurring outside of New York when, in fact, the solicitation occurred within New York, will lead to disciplinary action, up to and including termination for cause.
If you would like to learn more about the submission of trial applications (a copy of an insured’s medical records for
purposes of obtaining a preliminary quote), please contact your underwriter for further information. For further information regarding Situs, please review the Individual Life Situs Guidelines.