STOA: Commenters Aim to Polish Model Bulletin

Gary Sanders of the National Association of Insurance and Financial Advisors (NAIFA), Falls Church, Va., said NAIFA fully supports NAIC efforts to protect consumers from STOA arrangers.

NAIFA would like the wording of the draft bulletin changed to emphasize that only a very small portion of the producer community is involved in STOAs, Sanders says the NAIFA comment letter.

NAIFA also would like to see the NAIC acknowledge that some policyholders with unique needs might have legitimate reasons to annuitize a policy within the first year of a contract being issued, Sanders says.

“Therefore,” Sanders says, “NAIFA recommends that the first item in the bulletin under suggested company actions–”Review chargeback policies to ensure agent commissions are adjusted if a policy is annuitized within the first year of the contract.”–either be deleted or revised to read “Review chargeback policies and revise as necessary to provide that agent commissions may be adjusted if a policy is annuitized within the first year of the contract and other evidence conclusively indicates that the policy is being used to facilitate a stranger-originated annuity transaction.”

Ted Kennedy, an assistant general counsel in the Austin, Texas, office of SunAmerica Life Companies, a unit of American International Group Inc., New York (NYSE:AIG), says he would like to see drafters be more clear about whether the guidelines in the model are suggested or mandatory, and he also would like drafters to clarify that the annuity and life underwriting processes are different.

There is a concern that failing to adopt the guidelines in one bullet point could be used against a company in litigation, Kennedy says.

In addition, if that bullet point were adopted, “it appears we would be required to revise and re-file all of our applications,” Kennedy says. “We urge removal of this bullet-point.”