The National Association of Insurance Commissioners is getting closer to a final showdown over an annuity sales standards proposal that could help state insurance regulators create a defense against federal sales standards proposals.
Members of the NAIC’s Life Insurance and Annuities Committee today approved proposed revisions to the NAIC’s Suitability in Annuity Transactions Model Regulation, or Model Regulation Number 275, during a conference call meeting.
The vote tally was not immediately available.
The proposed suitability model revision would require agents, brokers and others selling annuities to act in the best interest of the consumer, and to disclose potential conflicts of interest.
An annuity seller would have to try to get more detailed information about an annuity shopper’s finances, to make sure that the products recommended would fit the consumer’s needs.
But the proposal would let producers continue to use commission-based compensation arrangements.
Bruce Ferguson, a senior vice president at the ACLI, put out a statement welcoming the NAIC committee’s approval of the model revision proposal.
“This important proposal will significantly enhance protections for Americans planning and saving for the future,” Ferguson said in the statement. “Retirement savers should be confident that financial professionals are acting in the best interest of consumers. The proposal the committee approved today achieves this goal and will be more effective than individual state fiduciary proposals that miss the mark on protecting consumers.”
The NAIC’s plenary — the body that includes all voting members of the NAIC — still must approve the proposed model revisions before they can take effect.
The NAIC is a Kansas City, Missouri-based group for insurance regulators. The group has no direct ability to create state insurance laws or regulations, but states often start with NAIC models when developing insurance laws and regulations.
In recent years, the U.S. Department of Labor, the U.S. Securities and Exchange Commission, and state insurance and securities departments have crowded onto the NAIC’s annuity suitability model turf, by proposing fiduciary rule sales standards and best interest interest standards.
Groups like the American Council of Life Insurers (ACLI) and the National Association of Insurance and Financial Advisors (NAIFA), and some state insurance commissioners, have suggested that an updated NAIC model could help shield life insurers and financial professionals against federal or single-state proposals that might ban use of commissions, or expose financial professionals to more litigation risk.
Members of the Life Insurance and Annuities Committee came close to approving the model revision earlier this month, at an in-person NAIC meeting in Austin, Texas. They put off final approval because of commenters’ concerns about two model forms.
One model form is supposed to help financial professionals summarize what they’ll be doing for a client.