Life insurance and annuity trade groups are urging the National Association of Insurance Commissioners to “strive for consistency” with the Securities and Exchange Commission’s Regulation Best Interest as the NAIC pushes ahead to revise its Suitability in Annuity Transactions Model Regulation.
The comment period for a draft of a proposed NAIC model rule revision expired Friday. The NAIC’s current annuity suitability model regulation is the basis for regulations currently in effect in 49 U.S. jurisdictions.
The NAIC is a group for insurance regulators in all 50 states, the District of Columbia and U.S. territories. The group develops model laws and regulations, and the member jurisdictions decide whether to adopt the models.
The Insured Retirement Institute, along with the American Council of Life Insurers (ACLI), the National Association of Insurance and Financial Advisors (NAIFA) and the Association for Advanced Life Underwriting (AALU), submitted comments on the NAIC model rule, stating that they support adoption of a “best interest” standard.
Will It Be a ‘Best Interest’ Standard?
In a drafting note, the authors of the current revision draft say that, for now, at least, the NAIC would prefer to stick with the term “suitability” in the model revision.
“Until such time the NAIC can evaluate any distinction in the text of the SEC proposal between a ‘best interest’ recommendation and investment adviser fiduciary duties, and the SEC and FINRA have finalized relevant terms, definitions and related requirements, the NAIC would opt to refrain from using the phrase ‘best interest,’” according to the text of the drafting note.
IRI Calls for Uniformity
In its comment letter, IRI stated that if the SEC’s final rule continues to use the phrase “best interest” to describe the standard the securities regulator adopts and the NAIC opts to use its “the interest of the consumer” label, the result “will be significant confusion and uncertainty among consumers, producers, carriers and regulators.”
Said IRI: “We think you will agree that this would not be a positive outcome. Introducing new terminology into the suitability model also raises the risk of inconsistent interpretations across the states.”
It remains unclear, IRI said, how the term “the interest of the consumer” differs from the SEC’s “best interest” language “and creates a fog of uncertainty around the duties of insurers and producers. We urge the NAIC to strive for consistency with the SEC, both in substance and terminology.”