Unpleasant surprises come in all shapes and sizes, and while polls have shown that life insurance tends to be more affordable than consumers originally assumed prior to buying, premium spikes certainly fall under the displeasing banner.
However, legislative actions are underway that would give current and prospective policyholders in New York State a head's up as to when their premiums are set to rise.
120 days early notice
Proposed by the New York Department of Financial Services, a new regulation is being considered in the Empire State that - if passed - would require life insurers to provide advanced notice regarding when premiums will increase and the reason why the change in pricing is necessary, New York Law Journal reported.
In accordance with the proposed rule, insurers would need to inform the DFS no later than four months - 120 days - before the hike for the rate change to be given the green light by state regulators. Already, insurance laws are on the books in New York that disallow insurers from altering non-guaranteed components of policies in a manner that can be construed as discriminatory or inequitable. Those elements that can be changed are expressly listed, enabling life insurers in the state to determine what elements are in and out of bounds. For example, if the premium hike affects profits, the changes can be prohibited.
Maria Vullo, DFS superintendent, pointed out that premium hikes can be hardest on those with fixed incomes, especially senior citizens who may be retired and not making the amounts that they used to when they were working full-time.
"Many existing life insurance and annuity policies are owned by New York's senior citizens who have dutifully paid premiums for years and can least afford increased costs to maintain insurance coverage," Vullo explained in a press release.
Vullo added that under New York state law in order for insurers to raise premiums, they first must prove that doing so is necessary and does it in a way that is both fair and equitable to all parties involved.
"The public has until early January to comment on the proposal."
45 days for public to comment
The proposal has since been published in the State Register. As such, this gives the public and fellow lawmakers 45 days - retroactive to Nov. 30 - for commenting on the regulation, establishing what if anything needs to be changed or given further consideration, New York Law Journal reported.
As to the reason why the proposal was made in the first place, DFS noted that it has received a number of correspondence in recent years from life insurance policyholders who were blindsided by price hikes, despite faithfully paying their premiums, according to New York Law Journal. Occasionally, rates have even doubled, DFS spokesman Richard Loconte recounted.
Should the legislation garner the requisite number of votes for passage, insurers and life insurance agents would have 60 days to make their policyholders and clients aware of the premium hike, assuming of course the change was deemed fair and equitable. DFS, meanwhile, would need 120 days notice.
"Americans purchased nearly $3 trillion worth of life insurance in 2015."
Rule change may be beneficial for insurers, agents
On the surface, the proposed regulation may seem like more red tape for insurers to cut through. However, it may be turn out to be a boon in the long run, as consumers may appreciate the fact that they're being given advanced notice so that they can apply the appropriate measures to absorb the cost increase.
As it is, consumers frequently turn to life insurance for financial security in retirement. For instance, last year, consumers increased the amount of coverage they had in life insurance by a combined $21 trillion, according to the American Council of Life Insurers. Nearly $3 trillion of the total was bought in 2015.
There's little doubt that consumers will continue to do so in 2017 and beyond. After all, since 2010, an additional five million U.S. households have life insurance protection in place, according to statistics maintained by LIMRA. There's still plenty of work for agents to do, however, as roughly 30 percent of Americans still aren't covered.