State Legislator Group Looking At Issue Of Suitability Of Sales
The suitability of products sold to consumers, an issue that insurance regulators have found is like grabbing a tiger by the tail, is a beast that state legislators will consider taming.
The topic of suitability received extensive discussion at the recent annual meeting of the National Conference of Insurance Legislators. An alternate model regulation to one currently being developed by the National Association of Insurance Commissioners is being considered by NCOIL.
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A decision by NCOIL on whether to pursue an alternate model, prepare a white paper or take a stance on the NAIC model will be made after regulators at the NAIC discuss the issue further.
The NAIC’s Life Insurance and Annuities Suitability model act and model regulation will be discussed during the NAIC’s winter meeting in Chicago later this week.
Rosanne Mead, chair of the working group, says work on the draft will start with a discussion of penalties.
Although the issue of company and producer responsibility for the suitability of a sale is not specifically on the agenda, Mead says it will probably be raised. Mead says that after the Chicago meeting there will be a better sense of whether the models will be moved out of the working group by the June 2002 meeting.
The project survived one motion at an “A” committee meeting to stop work on it. Some of the reservations that led to that motion were also sounded during the NCOIL session.
Bill Anderson, vice president and associate general counsel with the National Association of Insurance and Financial Advisors in Falls Church, Va., says he told NCOIL legislators that “we are not opposed to the concept of suitability and, in fact, we hope that all products our members sell are suitable.”
However, Anderson adds, NAIFA believes there are sufficient safeguards to ensure the suitability of products. Anderson also says that because of the exemptions of parts of the business such as direct marketers, “it is a very flawed regulation.”