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State Regulators Push Annuity Sales Standards Project One Step Forward

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The Annuity Suitability Working Group today decided to pass its proposed update of the National Association of Insurance Commissioners’ annuity suitability model regulation on to other teams at the NAIC.

The working group plans to post a new draft revision of the Suitability in Annuity Transactions Model Regulation (Number 275) in September, seek public comments, then push the results into the rest of the NAIC’s model review pipeline.

The working group has been trying to add a “best interest” provision to the model. The new standard would require sellers of annuities to recommend the best annuities for the clients, not simply annuities that appear to suit the clients’ needs.

(Related: Annuity Rules Should Apply to Investment-Type Life Products: Consumer Reps)

The NAIC is a group for insurance regulators. It may not end up adopting the proposed model revision.

If the NAIC does approve the revision, states would then decide whether to apply the NAIC’s changes to their own sales standards regulations.

The revision project has been under way since it still looked as if the U.S. Department of Labor’s original fiduciary rule might take effect. Working group members have discussed the project at in-person meetings and during conference call meetings for about two years.

Gillian Froment of Ohio, the working group chair, kept discussion at today’s in-person meeting focused on three points in the revision text:

  • Whether to include a line about there being a “reasonable basis to believe consumer would benefit from features of annuity,” or there being a “reasonable basis to believe product as a whole would address consumer’s needs.”
  • How to word any section explaining what to do about customers who decline to provide the information needed for suitability reviews.
  • How to word a statement about a carrier’s responsibility, or lack of responsibility, for other carriers’ products.

Froment shut down representatives from the American Council of Life I surfers and the National Association of Insurance and Financial Advisors who tried to talk about other revision-related points.

Birny Birnbaum of the Center for Economic Justice seemed to be nearing a consensus with industry groups on the idea that consumers who consciously refuse to disclose personal information should still have some way to buy annuities from agents and brokers.

Outside commenters and regulators said some consumers have researched annuities on the Internet and have no interest in a producer’s recommendations.

Dean Cameron, the Idaho commissioner, said some clients may have no interest in letting agents know how much money they have.

All participants in the discussion appeared to agree on the need to keep bad actors from using “don’t want advice” instruments to avoid having to give typical consumers much-needed advice.

Birnbaum and others suggested that making clients hear an explanation of the suitability review process and sign a separate form might work better than letting consumers reject suitability review by checking a box located next to a short no-advice statement located in a long form.


Links to documents related to the working group’s activities, including the meeting packet for the New York session, are available here.

— Read Producer Groups Sue Over New York State Sales Standard Regson ThinkAdvisor.

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