The Insured Retirement Institute (IRI) is asking the Kentucky Department of Insurance to put the term “best interest” back into a proposed annuity sales standards regulation update.
The Kentucky department is working to adopt a Suitability in Annuity Transactions Model Regulation update that was developed and approved by the National Association of Insurance Commissioners (NAIC), the same organization that developed the original model.
The NAIC tried to make its model update compatible with Regulation Best Interest, a financial services sales standard regulation adopted by the U.S. Securities and Exchange Commission. The NAIC’s best interest standard requires annuity sellers to act in the best interest of the consumers who are receiving recommendations about annuities.
Some financial professional groups and consumer advocacy group have suggested that Reg BI may be too weak and may do too little to discourage use of sales commissions paid by annuity issuers.
The Kentucky department was responding to arguments that the best interest requirement is too vague and might expose a financial professional to the risk of lawsuits.
The Kentucky department has decided to spend more time talking to interested parties about the issue, according to IRI.
Interested parties have been debating use of the term “best interest” in the model update for several years, write Jason Berkowitz, IRI’s chief legal and regulatory affairs officer, and Liz Pujolas, IRI’s state affairs director, in a letter sent to Sharon Clark, the Kentucky insurance commissioner.
“The same arguments that are being made now to encourage the department to remove the term ‘best interest’ were presented to the NAIC as part of this process, carefully considered and discussed, and ultimately rejected,” the IRI reps write.