Regulators have been given the go-ahead to develop new regulations that will seek to curb unsuitable annuity sales and the improper use of senior designations.
During the summer meeting of the National Association of Insurance Commissioners here, the NAIC’s executive committee approved these charges.
However, Birny Birnbaum, an NAIC funded consumer advocate, said the problem might not be just unsuitable sales, but could also be the way commissions are paid. “What if you couldn’t get more than 20% commission in year one and you got a certain percent each year after that?” he said. In some cases commissions can equal up to 110% of the first year premium on the sale, he said. “You don’t hear about an inappropriate umbrella policy,” he added, making a point of contrast.
“I would discourage you from revolutionizing the entire compensation structure of the industry,” said Michael Lovendusky, a representative with the American Council of Life Insurers, told regulators. “You could put every one on salary and it would still not prevent unsuitable sales.”
The proposed senior designations model is on a fast-track with a potential June 16 vote on a draft that could be brought to plenary by the end of June, said New York Superintendent Eric Dinallo, chair of the Life Insurance and Annuities “A” Committee. This model, based on a model adopted by the North American Securities Administrators Association, Washington, received on April 1 the support of AARP and ACLI, both of Washington, and the National Association of Insurance and Financial Advisors, Falls Church, Va.
Prior to the “A” Committee discussion on a new suitability product, the Suitability of Annuity Sales Working Group met to begin looking at how to get a handle on what they say are continuing problems associated with the sale of annuities to seniors.
The NAIC already has 2 versions of a suitability model in place in approximately 35 states. One version focuses strictly on the suitability of sales to consumers age 65 and over. A second version expands on the original to include all consumers.