The current version of the NAIC’s Annuity Disclosure Model Regulation (Model 245), revised last year, has as its stated purpose to “specify the minimum information which must be disclosed, the method for disclosing it and the use and content of illustrations, if used, in connection with the sale of annuity contracts.” Reviewing some of the newly added requirements can provide some additional insight into possible changes that could impact insurers’ policies and procedures in the not so distant future.
In terms of the actual disclosure documents, some revisions have been made to the minimum informational requirements. For example, it’s no longer acceptable to limit basic insurer information on these types of document to its address. An insurer will now have to also include its legal name, physical address, website address and telephone number. Additionally, both the guaranteed and “non-guaranteed” elements of the contract, and their limitations, if any, need to be provided along with an explanation of how these elements operate.
Newly specified disclosures for fixed indexed annuities include the elements used to determine the index-based interest, such as the participation rates, caps or spread, as well as an explanation of how the index-based interest is determined. The pre-existing requirement, which states the insurer must explain the initial crediting rate and specify any bonus or introductory portion, the duration of the rate and the fact that rates can change from time to time and are not guaranteed, is still present in Model 245.