Massachusetts Attorney General Andrea Joy Campbell mimicked the language favored by federal regulators by proposing provisions to ban hidden “junk fees.”
Industry trade associations dislike those two words more at the state level. In fact, the proposal is controversial as it relates to the life insurance industry, three trade groups wrote in a letter seeking exemptions for “life and annuity carriers and products.”
Life and annuity transfers are already “strongly and skillfully regulated” by the Massachusetts Department of Insurance, according to a letter sent Wednesday by the Massachusetts Life Insurance Association, the American Council of Life Insurers and the Insured Retirement Institute.
“Disclosures specific to life insurance fees must be sent to consumers, advertisements are strictly regulated and must be approved by the department, and the Massachusetts insurance commissioner and regulators in other states have broad powers to conduct inspections of market conduct and to request information and data from licensees,” they wrote. “Including the life insurance industry in the regulation is unnecessary and inappropriate and would harm our policyholders.”
Full disclosure of so-called “junk fees”
The proposed regulations would require Massachusetts businesses to “clearly disclose the total cost of a product at the time it is presented to consumers, provide clear and accessible information about whether charges are optional or necessary, and simplify the process for canceling trial and recurring offers fees, among other rules,” Campbell’s office said in a news release.
“Millions of Massachusetts consumers are harmed every day by businesses that charge hidden or surprise fees for profit,” Campbell said. “By banning junk fees and requiring transparency, these proposed regulations will not only ensure that consumers know what they are actually paying for when they buy a good or service, but will also level the playing field and market for those honest businesses that clearly disclose their prices in advance.”
The state describes “junk fees” as hidden or surprise charges above the advertised price of a good or service. These fees, sometimes called “convenience fees” or “service fees,” are often not disclosed or explained, or are only disclosed at the end of the purchase rather than at the beginning, the release said.
President Joe Biden has used “junk fees” in several efforts to create rules in various industries. The financial services industry is most concerned about the fiduciary rule proposed by the Department of Labor. The comment period for this rule ends on January 2.
“Troublesome” for life insurers
A number of sections in the proposed regulation “are problematic for life insurance companies,” the letter explained. For example, a section of the rule would make it a violation to fail to “disclose the total price of any product before requiring a consumer to provide any personal information, including payment information, unless said information is collected specifically and only to the extent necessary to determine whether the sale of such product to the consumer is legal or whether the product is available in the consumer’s geographic location.”
While this disclosure requirement may make sense for other industries, it would “undermine the ability of life insurers to insure properly, thereby impairing consumer access to financial and retirement security products,” the trade associations said.
“Insurers must collect personal information during the underwriting process before quoting a total price to a customer,” the letter added. “Life and annuity carriers and distributors, for example, must collect personal information about a person’s age, general health and financial situation before quoting a price and issuing a contract to a consumer. Insurance depends on the collection of personal information – in advance, with the permission of the customer – appropriate pricing of the product.”
The AG’s office held a public hearing on the proposal Wednesday, and Campbell said the rule could be adopted soon after. If passed, Massachusetts would be only the second state (after California) to issue a rule specifically targeting “junk fees.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other events in more than 20 years of daily journalism. John can be found at [email protected]. Follow him on Twitter @INNJohnH.
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