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Delaware Adopts Annuity Sales Standards Regulation

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Delaware is getting an annuity sales standards regulation based on the new National Association of Insurance Commissioners’ annuity suitability model update.

Delaware Insurance Commissioner Trinidad Navarro approved the model update Jan. 15, and the Delaware Department of Insurance published the regulation adoption and final order document earlier this week.

The update is set to take effect Aug. 1.

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The NAIC worked to make its update to the Suitability in Annuity Transactions Model Regulation compatible with the U.S. Securities and Exchange Commission’s Regulation Best Interest. The SEC developed Reg BI during the administration of former President Donald Trump.

The model update requires annuity sellers to act in consumers’ best interest, and it lets annuity sellers collect commissions from the annuity issuers, rather than relying solely on fees from the purchasers.

Delaware’s move to adopt the NAIC model update means that Delaware, like a number of other states, will be trying to implement regulations designed to mesh well with Reg BI at a time when some in the administration of President Joe Biden might try to modify Reg BI.

Biden represented Delaware in the U.S. Senate from 1973 through 2009, and its possible that Navarro’s decision to approve the regulation update could get Biden’s attention.

Arizona, Arkansas, Iowa, Michigan and Rhode Island have also adopted laws or regulations implementing the NAIC model update.

Navarro wrote in the order approving the update that the department received only three oral comments and five written comments on the update proposal, and that all of the commenters supported the regulation update.

“It is noteworthy that states must work toward adopting the 2020 revisions within five years after adoption of the revisions by the full NAIC membership to maintain their authority to regulate the sale of fixed annuities,” Navarro wrote in the order.

“Timely adoption of the proposed amendments ensures the department will be able to maintain its authority to regulate the sale of fixed annuities,” Navarro wroth.

Susan Neely, who is the president of the American Council of Life Insurers, and Diane Boyle, the senior vice president of government relations at the National Association of Insurance and Financial Advisors, put out a joint statement welcoming Delaware department approval of the NAIC’s model update.

“People purchasing annuities deserve guidance from financial professionals required to act in the consumer’s best interest,” Neely and Boyle said in the statement.

The new Delaware regulations will protect consumers while helping to ensure that lower-income and middle-income savers can still get advice about annuities, Neely and Boyle said.

— Read Here Are the States With Best Interest Rules for Annuities, on ThinkAdvisor.

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