Iowa and Minnesota are moving ahead with efforts to impose tighter regulation on sales of equity-indexed annuities.
Regulators in those states already are developing EIA standards, and they are talking about enlisting 4 more states in the effort, according to Jim Mumford, first deputy commissioner at the Iowa Division of Insurance.
Carriers in Iowa and Minnesota account for 67% of EIA sales, and adding the 4 other states to the project would push the total to 87%, Mumford says.
Iowa and Minnesota launched their EIA oversight effort during the recent spring meeting of the National Association of Insurance Commissioners, Kansas City, Mo.
EIAs are annuities that give an investor the ability both to earn fixed returns and to collect extra returns that are tied to gains in the performance of stock market indices.
Insurers say EIAs are fixed annuities, and some regulators have tried to support that view by requiring insurers to call the products “indexed annuities” or “fixed indexed annuities,” rather than “equity-indexed annuities.”
The National Association of Securities Dealers, Washington, has been investigating EIA sales practices and commission structures.
Regulators in Iowa and Minnesota are developing EIA guidelines based on proposed standards drafted by the Insurance Marketplace Standards Association, Bethesda, Md., Mumford says.
The standards relate to disclosure, agent training, and efforts to ensure that products sold are suitable for the buyers, Mumford says.
Regulators also are talking to IMSA about the possibility that IMSA might notify them if IMSA detects a potential problem, Mumford says.
If the IMSA standards were in place and a company were an IMSA company, regulators could have more confidence that a company was selling EIAs properly, Mumford says.
Meanwhile, Iowa and Minnesota are developing a producer training program that would include 4 hours of general EIA information along with any product-specific information that a carrier wanted to add.
Regulators hope to work with vendors to get the producer training programs ready by the end of the year, Mumford says.
Don Walters, IMSA general counsel, says the IMSA board probably will vote June 21 to make the group’s proposed EIA standards part of its body of standards.
The idea of IMSA providing an “early warning system” for regulators is still being reviewed, Walters says.