New Draft Of Suitability Model Due Soon From NAIC Group
Efforts to hammer out a suitability regulation will resume within the next few days as the latest draft of a model regulation is presented to insurers, producers and consumer advocates for comment.
For over a year, regulators at the National Association of Insurance Commissioners have been refining the concept of suitability with drafts of the Life Insurance and Annuities Suitability Model regulation and model act.
Among the issues that have arisen is who should be responsible for the suitability of a sale.
The latest draft will clarify the responsibilities of insurers and producers, according to Rosanne Mead, who is chair of the suitability working group of the NAIC in Kansas City, Mo.
Mead says the working group has always believed the responsibilities of each group were evident in the draft, but she says the new language will make those responsibilities very clear.
“I see it as an attempt to make it more clear,” she says. For example, companies may have “more of a systems responsibility.”
The draft will, in all likelihood, include definitions of a sophisticated purchaser and an accredited investor, according to Mead.
In a Dec. 10, 2001 draft of the regulation, ‘sophisticated purchaser’ is defined as an an institution, trust or individual represented by an independent certified public accountant or legal counsel in the purchase of a life insurance or annuity product. It can also include, among other things, a person purchasing business-owned life insurance or employer-sponsored life insurance.
An ‘accredited investor’ is a definition used in securities regulation, she continues. It comes down to a matter of a client’s net worth and usually refers to wealthy investors for certain types of securities offerings, Mead explains.
Additionally, under the exemption section, a new exemption for unregistered group variable annuity contracts will be added, she says.
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 28, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.