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November 08, 2002 at 07:00 PM
NU Online News Service, Nov. 8, 11:00 a.m. – Regulators in Chicago this week took another stab at what has been eluding the life insurance industry for the better part of five years: creating suitability standards. These are standards intended to assure that producers sell financial products to customers that are appropriate for each customer’s situation.
The meeting is being described as a brainstorming session by Utah Insurance Commissioner Merwin Stewart, chair of the Life & Annuities “A” Committee of the National Association of Insurance Commissioners, Kansas City, Mo.
Stewart says that there are a number of choices that regulators will look at, and those solutions that appear worthwhile will then be discussed publicly. Any possible solutions proposed by insurers and producers would also be considered, he adds.
One possibility that has already been discussed and that could resurface as a possible solution is a suitability regulation similar to one in Iowa.
Another possibility, a software program that would flag potential suitability problems, has “caught the interest” of regulators, Stewart adds.
What is needed is “an assurance that customers are being watched over and sold products that are appropriate,” he explains.
Stewart says he thinks that if a company implements good standards that are visible to regulators, keep customers informed and offer assurances that a good job is being done, then regulators will be satisfied.
There is a distinction between “perfectly suitable” and “reasonably suitable,” says Stewart. A product should be suitable when sold. But regulators do not want to create a liability for a company or insurer by implementing a standard that does not account for changes to customers’ circumstances.
