NU Online News Service, April 6, 2004, 2:40 p.m. EST – Missouri legislators are considering a bill that would put variable products under the purview of both insurance and securities regulators in the state, a move that is being opposed by insurers and agents.
In the past, similar legislation was introduced in Kansas but has not been successful.
Currently, insurance regulators have an exclusive right to regulate variable products in 48 states, according to the American Council of Life Insurers, Washington.
The Missouri bill, H.B. 1665, was voted out of the House Financial Services committee on April 2 in an 11 to 8 vote and now will be addressed by the full House. It has the support of Governor Bob Holden, Secretary of State Matt Blunt and Speaker of the House Catherine Hanaway.
Blunt’s office says that the bill is needed because currently, there is an exclusion from state enforcement of investor protection laws. Rather than have the state insurance department develop standards, Blunt says that it would be more efficient to work up rules using the securities division’s existing staff and expertise.
During a hearing on the issue, Carl Wilkerson, ACLI vice president and chief counsel-securities litigation, Washington, pointed out that variable products are already regulated by the Securities and Exchange Commission, the National Association of Securities Dealers and state insurance departments. The bill, he continued, would create the potential for conflicting regulation and create unnecessary compliance costs.
There were no instances that were raised during the hearing that would suggest that there is a need for additional regulation, Wilkerson says.
But Randy McConnell, a spokesman for the Missouri insurance department, cites three recent examples in which variable annuities were sold to elderly clients who “will not see the light of day” when they would be eligible to take surrenders without penalty. In those three cases, a total of $300,000 was returned to those consumers, he says.
The bill would give the Secretary of State jurisdiction over the suitability of insurance, while the insurance department would retain authority over products and agent oversight, he explains.
And if the Secretary of State had jurisdiction to act on suitability matters, then the insurance department could work with them and take action under its authority over agent licensing, McConnell says.
Lorie Smith, executive director of the Missouri Association of Insurance and Financial Advisors, Jefferson City, Mo., says that MAIFA testified to the legislature that an agent currently has to show a broker-dealer that a product is suitable and that the bill would thus create an unnecessary extra layer of regulation.
She notes, however, that MAIFA, the state chapter of the National Association of Insurance and Financial Advisors, has members who are on both sides of the issue.
A meeting with Hanaway and industry representatives is expected this week.