A model that would regulate the sale of annuities to senior citizens advanced a major step toward full approval by state insurance regulators.
The Senior Protection in Annuity Transactions model regulation was adopted by the Life & Annuities “A” committee of the National Association of Insurance Commissioners, Kansas City, Mo. The committee, which narrrowly attained a quorum needed to vote on the model, voted it up by a 6-1 margin.
The model must still be adopted by the NAICs executive committee and plenary before becoming NAIC recommended policy.
The issue of suitability has been a controversial one, spanning over four years and numerous drafts.
Among other things, the current model holds both insurers and producers responsible for the suitable sale of annuities and includes variable annuities under its purview.
The model requires that prior to the purchase, surrender or other disposition of an annuity based on a producers recommendation, there be reasonable efforts to obtain information about the senior consumers financial and tax status, investment objectives and other relevant information.
Additionally, an insurer must establish a system that will assure compliance with the regulation.
Other provisions in the model state that compliance with the National Association of Securities Dealers Conduct Rules regarding suitability will satisfy the requirements for variable annuities.
For a full text of the model, visit www.naic.org.
Final changes to the model before the vote included new wording for the scope of the model developed by the American Council of Life Insurers, Washington.
Changes also included new language offered by the Wisconsin insurance department and North Dakota Commissioner Jim Poolman concerning the duties of insurers and insurance producers. The new language states that insurers are responsible for establishing systems that ensure compliance with suitability requirements.
“This is a good product. It is not perfect in everyones eyes and probably not in anyones eyes, but it is a good product,” said Merwin Stewart, Utah commissioner and chair of the “A” Committee, after the vote.
Reaction following the vote was mixed, interviews indicated.