Producers should be able to collect annuity sales commissions even when they have not recommended the transactions, insurance industry commenters say.
The comments were submitted in response to efforts by regulators at the National Association of Insurance Commissioners, Kansas City, Mo., to update the Annuity Suitability Model.
Proposed revisions were exposted to public scrutiny July 2.
Suitability rules are the rules that regulate efforts to ensure that consumers get financial services products that suit their resources and their needs.
Ohio Insurance Director Mary Jo Hudson has written to oppose the idea of updating the model.
“We believe that the adoption of a new suitability model would undermine our efforts to achieve uniformity on this important issue,” Hudson writes.
“To date, 31 states have adopted the current model regulation,” Hudson reports. “A new model would put all states out of compliance and create uniformity issues between those states that adopt the new model and those states that stay with the old.”
Instead of updating the model, the working group should help develop uniform enforcement procedures for the current model, Hudson writes.
Riva Kinstlick writes on behalf of Prudential Financial Inc., Newark, N.J., that the company opposes a “wholesale revision of the model.”
“We believe the current model is quite adequate in setting forth requirements and enforcement procedures to assure that insurers and producers sell annuities in a suitable fashion,” Kinstlick writes.
“Especially troubling is the implication in Section 6C that insurers would be strictly liable in the event an unsuitable sale were to take place,” Kinstlick writes. “An insurer could be certain that every sale of its annuities is suitable only if it made its own suitability determination for every sale. This would be unsustainable in the case of the common 21st century business model of independent third-party sales of many insurers’ products.”
Northwestern Mutual Life Insurance Company, Milwaukee, and Thrivent Financial for Lutherans, Minneapolis, have submitted a joint letter suggesting that some sections of the proposed revisions could increase costs without doing much to produce more suitable sales.
The draft revisions, would, for example, require insurers to review 100% of annuity sales.