NU Online News Service, Aug. 16, 5:56 p.m. – State insurance regulators who are drafting a controversial National Association of Insurance Commissioners document establishing life insurance sales suitability guidelines talked about worksite sales and credit life insurance today during a discussion of products that should be exempt from the suitability requirements.
Members of the NAIC suitability working group decided to exempt individual life insurance and annuity products sold to employees during worksite visits from the requirements of the working group’s draft model of “Life Insurance and Annuities Suitability Model Regulation.”
Regulators also exempted credit life insurance from the draft model, but that exemption is contingent upon confirmation that another NAIC working group that is addressing credit insurance issues examine suitability standards for credit life insurance.
Regulators ended up making a unanimous decision to exempt the worksite sale of individual life and annuity products from the draft standards after hearing from supporters and critics of a worksite sales exemption.
Industry representatives and some regulators suggested applying the draft standards to worksite sales of individual life and annuity products would kill worksite sales of the products by making the sales process too cumbersome.
Patricia Jackson, a senior counselor in the law division of Met Life, New York, said that to comply with the requirements of the model regulation, a company would have to do fact finding, a process that would take several hours. No employer is going to allow an employee to take several hours during a day to do this, she said.
Jackson pointed out that a worksite sale is a simple sale with no sales illustration. An employee determines whether they need the insurance and what amount of insurance they can afford, she added. No direct solicitation is made.
Carroll Fisher, Oklahoma insurance commissioner and Rosanne Mead, chair of the suitability working group, said that consumers in their states had not registered worksite sales as an area of abuse or concern.
Fisher questioned whether a model was needed at all but said that if regulators decided to develop one, then worksite products should not be included under its scope.
But consumer advocates funded by the NAIC said that worksite insurance should be included in the suitability model, and some questioned whether the possibility of damage of worksite sales should be considered a legitimate reason for exempting worksite sales from the standards.
Jack Yanosky, a regulator representing the Pennsylvania insurance department, asked whether solicitation might not exist in the world of worksite sales.