State insurance regulators could make their own annuity sales standards more like the standards in the U.S. Department of Labor’s new fiduciary rule.
A top-level division of the National Association of Insurance Commissioners decided Monday to move ahead with an annuity sales standards revision project.
The division, the NAIC’s Life Insurance and Annuities Committee, will be asking for public comments on a proposed rewrite of the NAIC’s Suitability in Annuity Transactions Model Regulation (Model Number 275).
The chair of a committee working group recently put a “best interest standard of care” provision in the proposed revision.
Comments on the proposed model regulation will be due Jan. 22, 2018. The committee wants to have draft proposed revisions ready in time for official consideration at the NAIC’s 2018 spring meeting, which is set to start March 24 in Milwaukee.
The committee made the decision to expose the proposed model revision during a session at the NAIC’s national fall meeting, in Honolulu. The NAIC started the meeting last week and ended it Monday.
The NAIC is a group for state insurance regulators. It can’t change state laws or regulations itself, but states may start with NAIC models when developing their own insurance proposals.
A “best interest standard” for annuity sellers is, generally, a standard that requires the seller of an annuity contract to the put the interests of the customer first. Although the Labor Department has put off enforcing disclosure standards and other standards related to its fiduciary rule, it let a best interest standard for retirement advice and product providers take effect June 9.
Here are three more things to know about the proposed NAIC annuity standards revision.
1. The debate about the Life Insurance and Annuities Committee proposed standard revision could be about as lively as the debate about the Labor Department’s best interest standard.
The committee notes in a summary of its fall meeting activities that representatives for insurance regulators, consumers, insurers, and agents and brokers all showed up to comment on the idea of putting a best interest standard in Model Number 275.
The committee’s Annuity Suitability Working Group ran the Model Number 275 review session.
2. The rough definition of ”best interest standard” that people use to talk about the idea may not be the same as the official standard.
The Annuity Suitability Working Group met at the NAIC’s fall meeting on Sunday.
The working group notes in its own session summary that stakeholders have different ideas about how regulators should define terms such as “best interest” and “material conflict of interest.”
3. Debate about how any model revision should handle matters such as agent commissions are already starting to heat up.
The working group says stakeholders showed an interest in insurance producer and insurer compensation disclosure rules.
The working group and its parent committee have not yet posted the official exposure draft, but the working group included a preliminary version in a document packet it prepared for the fall meeting. The draft starts on the eighth page of the packet PDF file.
—Read Insurance Regulators May Update Annuity Sales Model Amid DOL Fiduciary Rule Uncertainty on ThinkAdvisor.