Regulators and others are debating whether insurers and insurance producers should be able to sell annuities to consumers who refuse to fill out suitability questionnaires.
The Suitability of Annuity Sales Working Group at the National Association of Insurance Commissioners, Kansas City, Mo., sparked the debate by posting a discussion draft of revisions to the Suitability of Annuity Sales Transactions Model Regulation on its section of the NAIC’s website.
Drafters are trying to set the rules insurers and producers should follow when determining whether particular annuity is suitable for a particular consumer. Insurers and producers are supposed to get information about matters such as a prospective buyer’s income and access to liquid cash, to determine how well the consumer would be prepared to handle restrictions on access to annuity assets.
One section, Section 6E, would affect how an insurer or producer could respond when a consumer failed to answer suitability questions.
The Center for Economic Justice, Austin, Texas, says insurers should have to have suitability information in hand before issuing annuities.
Allowing an insurer to issue an annuity without getting suitability information “guts the regulation, because it allows – even incentivizes – an insurance producer or insurer to avoid gathering relevant information to avoid becoming aware of information which would eliminate a desired recommendation,” Birny Birnbaum, the executive director of the center, writes in a comment on the draft.