Acquainting 14 new commissioners with a wide array of issues will be a priority for the American Council of Life Insurers at the spring meeting of the National Association of Insurance Commissioners this week, says an ACLI spokesman.
The ACLI will also be getting acquainted with the views of regulators on a new version of a suitability document, says Bruce Ferguson, senior vice president, state relations. A draft of the Annuity Transaction model act and regulation was released on Feb. 21 and is slated for a fast-track adoption during the June summer meeting.
After an initial examination, Ferguson says that the narrower focus of the suitability issue on the 65+ marketplace is a good thing. However, he says, a discussion needs to be held on whether uniform guidelines can be applied to an issue that is “very subjective by nature.”
ACLI has not formulated a position, Ferguson continues. However, questions such as “What problem are they trying to solve” and what regulatory tools are currently available, need to be discussed, he adds.
Given the fact that the draft was just released without industry input, a June adoption would be “probably unrealistic,” Ferguson says.
On the issue of developing an interstate compact that would create a single body for the filing of life insurance products, Ferguson notes that ACLI is supportive of the project. In states where the compact has been introduced such as Indiana, ACLI has worked for its enactment, he says.
However, he raised concern about changes to the compact, saying it could result in a lack of uniformity. Any changes should be introduced and done at one time rather than in increments, Ferguson continues.
Of importance to companies is a model Standard Nonforfeiture Law for Individual Deferred Annuities which could be advanced during the spring meeting, Ferguson says.
States are now considering lowering required nonforfeiture rates to reflect lower interest rates, he explains. Rather than have temporary measures put in place in states, ACLI wants to see “a permanent solution” put forth, he adds.
Currently, over 20 states have reduced the nonforfeiture interest rate to 1.5%, with two-thirds of those states including a sunset provision that would result in the rate reverting to the current 3% standard at some point in time, Ferguson says. A handful of those 20 states have changed the rate permanently, he continues, and the other 30 states still have the 3% rate in effect.
Failure to take action could result in products with short-term guarantees being pulled from the market, he cautions.
Reproduced from National Underwriter Edition, March 10, 2003. Copyright 2003 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.