NU Online News Service, March 4, 2003, 3:28 p.m. EDT – The American Council of Life Insurers, Washington, will be working hard this week to reach out to the many newcomers at the National Association of Insurance Commissioners, Kansas City, Mo.
As many as 14 new commissioners could show up for the NAIC spring meeting in Atlanta.
The ACLI will be talking to the new commissioners about work on a proposed suitability model, moves to develop a “single point of filing” for life insurance products, and measures to reduce the minimum interest rates built into the nonforfeiture provisions for individual annuities, according to Bruce Ferguson, the ACLI’s senior vice president-state relations.
The proposed suitability model would regulate the efforts insurers and producers must make to ensure that the individual products they sell suit the needs of the purchasers.
The NAIC released a draft of the proposed suitability model Feb. 21 and has slated it for fast-track adoption at the summer meeting, in June.
The ACLI has not formulated a position on the new draft, but it would like to see a discussion about whether uniform guidelines can be applied to an issue that is “very subjective by nature,” Ferguson says.
A June adoption is “probably unrealistic” because the draft was just released and was released without industry input, Ferguson says.
Another NAIC project, the single-point-of-filing initiative, would create a single body that insurers could use to seek approval for new life insurance products.
The ACLI supports the project, and it has worked for the enactment of the NAIC model compact law in states where lawmakers have considered bills based on the model, Ferguson says.
But the ACLI would like to see any changes to the compact template introduced and completed at one time, to prevent individual states from making changes that would lead to a lack of uniformity, Ferguson says.
The ACLI will also be talking to the new insurance commissioners about its interest in seeing states lower minimum nonforfeiture interest rates.
The rates apply to the assets consumers get back when they give up individual deferred annuities. Almost 30 states still have a 3% minimum in effect, Ferguson says.
The 3% minimum looked low when the NAIC first recommended it, but insurers say the rate now looks high, given the low returns currently available on government bonds and investment-grade corporate bonds.
More than 20 states have reduced the nonforfeiture interest rate to 1.5%, but two-thirds of those states have included sunset provisions that will eventually push the rate back up to 3%, Ferguson says.
Rather than seeing states adopt temporary measures, the ACLI would prefer to see “a permanent solution” put forth, Ferguson says.