From the insurance industry perspective, the first quarter of every year delivers substantial numbers of introduced bills to be reviewed for applicability to annuities. From unfair trade practices to suitability to replacement and more, the life insurance industry has much to monitor.
Some of the new and revised requirements are familiar adoptions of model laws, which should technically allow for eventual easier implementation by insurers. Other recent developments and proposed changes may ultimately require claims and underwriting system modifications, while some may mercifully ease speed-to-market in certain states.
Currently, Florida is one of a few states without the comprehensive annuity suitability provisions addressed in the National Association of Insurance Commissioners’ (NAIC) Suitability in Annuity Transactions Model Regulation (Model 275). The suitability requirements in that state are limited to sales of annuities to seniors. That may all change with the enactment of SB 166 this session (note that HB 167 contains similar proposals). The bill would require that recommendations relating to annuities made by an insurer or its agents apply to all consumers. Additional proposed revisions include requirements for a system for insurers regarding the supervision of recommendations, record retention and reporting. Consumer disclosures, as well as undertaking reasonable efforts to obtain the consumer’s suitability information, are also addressed.
Florida’s SB 166 also proposes a revision requiring additional disclosures in annuity sales. Regarding the current attached cover page for an annuity transaction, the pending bill would require that it must also contain the following information in bold print and at least 12-point type, if applicable:
- “Please be aware that the purchase of an annuity contract is a long-term commitment and may restrict access to your funds.”
- “It is important that you understand how the bonus feature of your contract works. Please refer to your policy for further details.”
- “Interest rates may have certain limitations. Please refer to your policy for further details.”
- “A [prospectus and policy summary] [buyers guide] is required to be given to you.”
Given all the embedded requirements associated with unclaimed property due diligence, reporting and remittance, it was a forgone conclusion that life insurers would face the certainty of continued legislative and regulatory interest in unclaimed property. So far, this has been the case with unclaimed property initiatives continuing to surface in legislatures.
States with pending bills this year include Massachusetts (HB 20), Montana (SB 34), New Mexico (SB 312), North Dakota (HB 1171), Rhode Island (HB 5452) and Vermont (HB 95). These bills include provisions providing for revisions to insurers’ claims processes similar to what the industry saw last year with changes adopted in Alabama, Kentucky, Maryland and New York.