Iowa’s top insurance regulator says the state will go beyond using the new annuity suitability regulation update developed by the National Association Association of Insurance Commissioners (NAIC).
Doug Ommen, Iowa’s insurance commissioner, says Iowa also will use the drafting notes included in the annuity suitability regulation update model, and a set of answers to frequently asked questions that an NAIC team is drafting.
Use of the FAQ document “will promote greater uniformity across NAIC member jurisdictions,” Ommen writes in Bulletin 21-01.
Ommen issued the bulletin to help annuity issuers and sellers operating in Iowa start to implement the state’s new annuity best-interest regulations.
Ommen helped lead efforts by the NAIC to revise the NAIC’s Suitability in Annuity Transactions Model Regulation.
The update includes provisions that require annuity issuers and sellers to attempt to act in the best interest of annuity prospects and purchasers. The NAIC tried to create a regulation that would mesh well with the U.S. Securities and Exchange Commission’s Regulation Best Interest.
The NAIC is a Kansas City, Missouri-based group for insurance regulators. States can decide whether or not to adopt its models, and some have trouble attracting takers.
Iowa was the first state to adopt the NAIC’s model rule. Since then, other states, including Arkansas, Arizona, Maine, Nebraska and Rhode Island, have followed suit.
Iowa’s regulation update officially took effect Jan. 1.
The Iowa Insurance Division (IID) will give insurers and annuity products 12 months to implement the regulations, Ommen writes.
“The IID believes this is an appropriate timeframe for insurers to conduct the requisite operational changes to their systems to establish internal processes to comply with the regulation,” Ommen says. “During this period, the IID will consider good faith efforts to be significant as we work with industry to implement their enhanced consumer protection standards.”
Ommen points out in a discussion of the NAIC model drafting notes that one note relates to annuity sales contests.
The updated model bans “any sales contests, sales quotas, bonuses and non-cash compensation that are based on the sales of specific annuities within a limited period of time,” Ommen writes.
But the drafting makes it clear that the regulations do not “prohibit general incentives regarding the sales of a company’s products with no emphasis on any particular product,” Ommen writes.
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