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June 03, 2008 at 12:07 AM
Regulators have received the go-ahead to develop one model regulation that will seek to curb unsuitable annuity sales and another model that will seek to end improper use of professional designations.
The executive committee of the National Association of Insurance Commissioners, Kansas City, Mo., approved the projects here at the NAIC’s summer meeting.
The proposed designations model is on a fast-track.
The NAIC’s plenary, or body that represents all voting members of the NAIC, could vote on a draft by the end of June, according to New York Insurance Superintendent Eric Dinallo, chair of the NAIC’s Life Insurance and Annuities Committee.
The model, based on a model adopted by the North American Securities Administrators Association, Washington, April 1, has the support of groups such as AARP, Washington; the American Council of Life Insurers, Washington; and the National Association of Insurance and Financial Advisors, Falls Church, Va.
During discussions about whether the NAIC should proceed with work on an annuity suitability model, Birny Birnbaum, an individual who gets funding from the NAIC to speak for consumers in NAIC proceedings, said there may be a problem with how commissions are paid as well as with unsuitable sales.
In some cases Birnbaum said, commission can equal up to 110% of the first year premium on the sale.
“You don’t hear about an inappropriate umbrella policy,” Birnbaum said. “What if you couldn’t get more than 20% commission in year 1 and you got a certain percent each year after that?”
“I would discourage you from revolutionizing the entire compensation structure of the industry,” said Michael Lovendusky, an ACLI representative. “You could put everyone on salary and it would still not prevent unsuitable sales.”
