A vote on a model law and regulation addressing the suitability of sales was put off by regulators who heard one last volley of opposition during the summer meeting here of the National Association of Insurance Commissioners.
The opposition of insurers, producers and others was reiterated during the Life “A” Committee session on the Life Insurance and Annuities Suitability model act. While parties restated the views they had expounded during the two-plus years the model was under development, commissioners weighed in with questions on the controversial issue.
North Dakota Commissioner Jim Poolman asked if part of the problem with replacements and suitability was the upfront compensation structure for producers. “This is stuck in my craw and my departments craw. Is the new push for a suitability model driven by a compensation system that drives to sell, to close the deal?”
Scott Cipinko, executive director of the Life Insurers Council, Atlanta, said an existing replacement regulation was supposed to address that issue. Cipinko reasserted comments made by Michael Lovendusky, representing the American Council of Life Insurers, and Ron Panneton, representing the National Association of Independent Financial Advisors, that there were existing regulatory tools in the form of model laws such as the Unfair Trade Practices Act, to ensure regulation of suitability.
Kevin Hennosy, a consumer advocate with Spread the Risk Inc., Kansas City, Mo., said the model placed too much emphasis on agents and not enough on companies. Additionally, he maintained that exemptions in the model would encourage companies to move to direct sales from more traditional life insurance selling approaches.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 17, 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.