NU Online News Service, Feb. 21, 3:58 p.m. – The National Association of Insurance Commissioners, Kansas City, Mo., has released a new working draft of a model act and a model regulation that address the suitable sale of life insurance and annuity products.
“We have a good talking document,” says Utah Insurance Commissioner Merwin Stewart, who is spearheading the development effort.
The public will get an official chance to talk about the draft in March, in Atlanta, at the NAIC spring meeting.
Regulators at the NAIC began developing the new draft after an earlier version, the Life Insurance and Annuities Suitability model act and regulation, ran into opposition from insurers, producers, consumer advocates and some regulators.
Regulators took a narrower approach to developing the new draft.
Stewart says the goal of the new draft is not to use a “best practices” approach, but to “set up minimum standards and requirements ? to be assured that standards are met.”
The new draft focuses on suitability of sales of insurance products to senior citizens, who are “more vulnerable” to unsuitable sales than other consumers, Stewart says.
Uniformity is one of the goals that the new model is striving for, Stewart says.
The new draft holds both insurers and producers responsible for the suitable sales of products, Stewart says.
The issue of responsibility was a major point of contention during the development of the earlier draft. Producers said the wording in the previous draft would have held them accountable for suitability without assigning enough responsibility to the insurers. Insurers said the producers were wrong.
The new draft does not include references to software that would flag unsuitable sales, and the NAIC will not make any specific suggestions or recommendations about software, Stewart says.
But, if a company does not have the confidence that it can meet suitability standards on its own, then it should consider using suitability software, Stewart says.