Some longtime defenders of indexed annuities are trying to head off efforts to impose any new requirements for insurance agents to act in clients’ best interest.
The annuity defenders, at the Fixed Annuity Consumer Choice (FACC) Campaign, are trying to get attention for their position: that regulators should stick with the current suitability for fixed annuities, and end efforts to apply a best interest standard to agents.
FACC has put out a new comment letter describing the best interest proposals now under consideration at the U.S. Securities and Exchange Commission and at the National Association of Insurance Commissioners as “essentially a reincarnation” of the U.S. Department of Labor’s fiduciary rule.
A three-judge panel at the 5th U.S. Circuit Court of Appeals issued a decision last week that appears to kill the DOL rule.
“Best interest is a fiduciary concept,” FACC says in a letter commenting on the 5th Circuit decision. “Many have admitted best interest is just another means by which to impose fiduciary standards and duties on agents.”
Insurance agents already have a legal duty to provide clients with accurate information, provide full disclosure, and ensure that any recommendations are suitable and meet a client’s needs and objectives, FACC says.
“But agents are not fiduciaries and should not be saddled with fiduciary obligations that will only beget confusion and litigation, and in the end destroy the vitality of the fixed insurance industry and deprive consumers of high quality fixed insurance products,” FACC says.
FACC has also made similar arguments about the idea of imposing a best interest standard on agents in other comment letters in the past.
FACC is a coalition that includes many of the people who, in 2010, fought to get Congress to have states regulate indexed annuities as fixed annuities, rather than letting the SEC regulate the products as securities. The list of people on the FACC contact list includes Dwight Carter, Eric Marhoun, Paul Garofoli, Andrew Unkefer and Kim O’Brien.
The DOL fiduciary rule would have required agents selling indexed annuities, but not traditional fixed annuities, to act in clients’ best interest; complicated efforts to continue traditional, commission-based compensation arrangements for the agents who sell indexed annuities; and created new opportunities for clients unhappy with purchases to sue the agents who sold them the annuities.
Some financial professionals and financial services groups have supported the idea of imposing some kind of best interest standard on annuity sellers.
The American Council of Life Insurers, for example, has said that it supports the idea of the SEC imposing a uniform best interest standard on all sales professionals, whether those sales professionals are insurance agents, securities brokers or financial planners.
— For more about the long, complicated annuity sales standards story, see a sampling of our ‘best interest’ proposal coverage, on ThinkAdvisor.