The American Council of Life Insurers is doing what it can to help Rep. Ann Wagner, R-Mo., find support for her proposal for replacing the U.S. Department of Labor’s fiduciary rule.
The House Financial Services Capital Markets Subcommittee held a hearing on Wagner’s discussion draft Thursday.
Mark Halloran, an insurance company executive who spoke for the ACLI at the hearing, said the ACLI believes the Wagner proposal would fix problems in Labor’s rule that could threaten consumers’ access to insurance, annuities and financial advice, and that it could also set appropriate standards for the relationship between consumers and financial professionals.
Adopting the draft would “stabilize the marketplace for the delivery of retail financial products and services to consumers and will benefit consumer interests by restoring freedom of access and choice,” Halloran said, according to a copy of his written testimony posted on the committee website.
Suitability v. Fiduciary Rule
Life insurance agents who sell life insurance, traditional fixed annuities and indexed annuities now have to abide by a “suitability standard” developed by state insurance regulators through the National Association of Insurance Commissioners. Agents and insurers are supposed to be able to show that the products they sell are suitable for the buyers.
Under the Labor fiduciary rule, and a related “prohibited transaction exemption” that’s set to take effect in January, distributors and sellers of indexed annuities will have to shift to a fiduciary standard and a best interest standard. Under those standards, they will have to be able to document that they are acting in the best interest of retirement saver customers. They will have to use new procedures to show that they have identified any possible conflicts of interest, done what they can to minimize conflicts, and disclosed any possible conflicts. Distributors of indexed annuities will have to meet high volume standards. Distributors will also face regulatory provisions that let unhappy retirement savers participate in class-action lawsuits.
Life agents and brokers have argued that the rules will make earning commissions from selling indexed annuities difficult, and that compliance expenses and litigation risk will make providing live-human advisors for fee-based customers with small accounts impractical.