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December 31, 2019 at 05:51 AM
The Insured Retirement Institute (IRI) says state insurance regulators’ sales standard proposal includes a great feature for financial professionals: a provision that may protect annuity producers from having to comply with multiple sets of sales standards.
Members of the National Association of Insurance Commissioners’ Life Insurance and Annuities Committee endorsed the proposal — an update of the NAIC’s annuity suitability model — Monday, during a conference call meeting.
(Related: Top-Level NAIC Committee OKs Annuity Sales Standard Proposal)
To become an official NAIC model update, the proposal must win approval from the NAIC’s Executive Committee and from the NAIC’s plenary. The plenary is the body that represents all voting members of the NAIC.
If the NAIC adopts the model update, each state will get to decide for itself whether it wants to implement the update.
The updated model would require annuity sellers to put consumers’ interests first, disclosure potential conflicts of interest, and get more information about the consumers, to improve efforts to assess how will specific products might suit the consumers’ needs.
But the updated model would continue to allow the use of commission-based compensation arrangements.
Proponents say the update could also help states provide an alternative to efforts by states like Massachusetts and New York to impose standards that are similar to, or tougher than, the fiduciary rule that was adopted by the U.S. Department of Labor under former President Barack Obama and then blocked in the federal courts under President Donald Trump.
The Safe Harbor Provision
IRI says the proposed model update also includes a safe harbor provision for insurance producers who sell annuities.
The provision would affect annuity producers who are subject to, and comply with, a set of sales standards other than the NAIC suitability standard, such as the federal Investment Advisers Act, or the U.S. Securities and Exchange Commission’s Regulation Best Interest standard. Regulation BI is set to take effect July 1, 2020.
