Time For Regulatory Collaboration On FIAs

Just as with other annuities and all financial services products, proper sales practices and suitability standards must be established and adhered to in FIA distribution. There is still work to do to bring more clarity to the regulation of FIAs and to all annuities.

Therefore, the time is right for meaningful collaboration among insurance product regulators to ensure a regulatory system that provides effective consumer protection — without diminishing the ability of the industry to bring innovative products to market quickly.

A regulatory environment with clear standards, appropriately tailored to the products being sold, will allow the industry to ensure that all consumers fully understand the benefits of the products they are considering purchasing.

This is not to imply or advocate a “one size fits all” set of regulations or a convergence among existing regulatory organizations. Rather, it advocates having these organizations work together to develop rules and regulations that appropriately take into account the similarities — as well as the differences — among the products.

For example, there is a need for clear standards for a point-of-sale document that would provide straightforward and succinct disclosure to prospective annuity purchasers. In light of the differences between variable annuities, traditional fixed annuities and FIAs, the disclosure documents for each would not be identical. However, they could be similar in a way that facilitates comparisons and enables consumers to make informed decisions.

Of course, successful collaboration of any kind always depends on each key stakeholder seeking the same goals. By listening to statements of the most prominent industry organizations (including National Association of Insurance Commissioners, National Association of Securities Dealers and the Securities and Exchange Commission), the industry can discern themes about the importance of proper disclosure, suitability, and agent education. The position of the insurance industry really should be no different: strengthen these areas and ensure that every sale of a FIA, variable annuity, or traditional fixed annuity is appropriate.

This can be done by creating an environment that allows the annuities industry to continue its tradition of innovation. With clear, effective standards for all annuities, the business can continue to provide consumers with meaningful products that help fund their retirement.

Everyone in the annuities industry has the same ultimate goal — to meet the needs of the consumer. That is what success in the market is all about. So the industry needs to continue supporting the value of consumer choice and work together to provide those choices.

FIAs have expanded the spectrum of choice and have earned a rightful place in the total array of retirement planning options.

The history of annuities is built on responding to continuing socioeconomic changes and effectively addressing the financial needs of Americans. Let’s continue this tradition by embracing the kinds of change within the industry that ensure consumers will have meaningful choices for achieving financial independence.