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Insurance Trade Groups Sound Off Again

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Several insurance trade groups are making clear to the new Consumer Financial Protection Bureau (CFPB) that while the insurance industry supports the agency’s moves to stop exploitation of seniors during the sale of financial products, the agency has no jurisdiction over insurers or agents.

The industry’s views were contained in comments sent to the agency in response to a request for comment on whether the agency should act to regulate the use of financial advisor certifications and designations regarding the sale of investment products to seniors.

The issue of senior designations was included as part of a request for comment on a package of options available to deal with the exploitation of seniors and impose “best practices” in the sale of investment products to them.

More than 700 comments have been received by the agency on the issue. The comment period closed Tuesday.

Making clear the industry’s position were comments from the Committee of Annuity Insurers (CAI), which represents 30 insurers, the National Association of Insurance and Financial Advisors and the Insured Retirement Institute.

Hubert H. “Skip” Humphrey, head of the CFPB’s Office for Older Americans, said in response to the request that, “We look forward to reviewing the comments we received about the certification and designations of seniors’ financial advisors.”

He added that, “We know that con artists and, sometimes even family members, think older people are easy targets for financial exploitation and abuse.  We hope the comments we received will help us develop tools for seniors so they can make sound financial choices and protect their financial assets.”

But, in their comment letters industry trade groups indicate that while they support the agency’s efforts, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and state insurance regulators are already on the case.

And, they said that Dodd-Frank specifically says the CFPB should stay hands off when it comes to regulating those engaged in the “business of insurance.”

A provision of the law, titled “Senior Investor Protections,” offers grants to states that implement legislation protecting those 62 and older from professionals wielding misleading certifications or designations.

The law references both the North American Securities Administrators Association and the NAIC model rules on the use of senior-specific certifications and professional designations.

According to data supplied to National Underwriter by the NAIC, 39 states have adopted laws or rules that comply with the provision that makes them eligible for grants to implement it.

The CAI letter commends the agency for its efforts to protect seniors from fraudulent or deceptive practices.

But, it also notes that the Dodd-Frank financial services reform law that created the agency also restricts its authority.

The CAI letter said that “it strongly supports” the CFPB’s “efforts to determine what types of abusive practices target older Americans.”

And, it offers as a model the consumer protections developed by insurance companies and state regulatory agencies to protect seniors purchasing insurance products.

But, it notes that under Dodd-Frank, the CFPB cannot regulate activities conducted as part of the “business of insurance,” which it says is “defined broadly” to include the “writing of insurance … by an insurer, including all acts necessary to such writing … and the actives related to the writing of insurance … conducted by persons who act as, or are … agents … of insurers.”

The comment letter also notes that Sec. 107 of Dodd-Frank also specifically provides that the CFPB “may not define as a financial product or service, by regulation or otherwise, engaging in the business of insurance.”

Thus, “it is clear that the charge of the CFBP “does not extend to regulating the insurance business, including the sale of annuities, in any manner.”

The IRI states in its letter that, “While the CFPB does not have jurisdiction over the IRI’s insurer and broker-dealer members or any matter relating to the sale of state insurance regulated products our members distribute, including annuities, we recognize the importance of senior financial literacy efforts and support current regulations with which our members already comply that are intended to aid in the protection against senior financial exploitation.”

The IRI letter adds, “By highlighting proactive activities and practices and collaboration with state and federal regulators, this letter will show that our industry is well positioned to serve older clients.”

The NAIFA comment letter is similar. It states that “Although the CFPB does not have jurisdiction over life or health insurance, it is important to be aware that the NAIC has adopted a model rule addressing the use of senior-specific designations and certifications in connection with the marketing and sale of life insurance and annuity products.”


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