Commissioners Challenge The Industry On Suitability
Insurance commissioners formally unveiled their latest version of suitability guidelines and bluntly challenged the industry to work on an effort they said will be put in place.
Charging that the industrys goal has been to “Delay, delay, delay; kill, kill, kill,” North Dakota Commissioner Jim Poolman challenged the industry to take action on getting consensus and working to adopt the Senior Protection in Annuity Transactions Model regulation and act.
The National Association of Insurance Commissioners gets criticized for not taking action fast enough, Poolman said during the spring meeting here. In fact, he says, some insurance people refer to the NAIC as “No Action Is Contemplated.”
Countering this quip, Poolman said the newest effort to create suitability standards has been narrowed in scope to focus on those consumers 65 and over. “Come up with a solution rather than just killing it,” he said.
“What we really would appreciate is for you, in a sincere effort, to help us approve a model with the objective that we seek,” said Merwin Stewart, Utah insurance commissioner and chair of the Life & Annuities “A” Committee.
During the frank discussion, insurers were reminded that in a debate on whether variable products should also be regulated by securities commissioners, the industry maintains that an insurance commissioner should be the sole state regulator. However, it was noted by Brian Staples, a Kentucky regulator, that “we as insurance regulators dont have suitability regulation that we can apply.”
In fact, one argument being used in a bill in Kansas calling for variable products to fall under the purview of the securities commissioner, is that there are not suitability guidelines in place.
For its part, the industry told commissioners that it needs to have a better sense of how the latest model was developed. Regulators worked on the model behind closed doors, a point of concern for insurers.
It is important to understand the “thought processes” that went into the models development, said Scott Cipinko, executive director of the Life Insurers Council, Atlanta.
“We did not close doors so we could slip up behind you or sneak something by you,” Stewart responded.
Linda Lanam, vice president and deputy general counsel with the American Council of Life Insurers, Washington, said ACLI will take the model back to member companies.
Ron Panneton, associate general counsel with the National Association of Insurance and Financial Advisors, Falls Church, Va., said an initial reading of the draft is encouraging and efforts to establish guidelines worthwhile.
Reproduced from National Underwriter Edition, March 17, 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.