The New York Department of Financial Services (NYDFS) is seeking information regarding the way that 403(b)s are being marketed to teachers.
According to The Wall Street Journal (subscription required), on Oct. 1 the NYDFS sent letters to “a dozen major insurers” requesting details regarding how they market retirement-income products to teachers. The Journal cites “people familiar with the matter” as saying that the letters mark the beginning of a probe into practices the industry pursues. According to the Journal sources, the insurers must respond to the letters within three weeks.
Which insurers received the NYDFS letters was not immediately clear, says the Journal; it further reports that the Life Insurance Council of New York had no immediate comment, according to its spokesman.
The Journal reports that the anonymous sources say NYDFS Superintendent Linda Lacewell, along with her deputies, are concerned over whether teachers are being “properly informed” about the cost and merits of retirement products. It adds that there is concern over some insurers’ heavy reliance on former teachers to sell retirement income products, and that school district employees may trust them too much.
A state regulatory official who preferred to remain anonymous told the Journal that the focus of the probe will be to determine whether “unfair and deceptive marketing practices” are being employed, and that it will include examination of elements of the marketing process — such as how agents access teachers. Investigators are particularly interested in insurers’ fees and the commissions agents are paid, as well as their disclosure, according to the official.
The Journal notes that the New York State department that regulates insurance is one of the largest, and that its actions are influential with its counterparts in other states.