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July 08, 2021 at 09:05 AM
What You Need to Know
- Montana, Texas, Alabama and Virginia are other states with new, NAIC model-based suitability requirements.
- The ACLI and NAIFA have both blessed the new suitability efforts.
- A compliance specialist says many agents will have to keep better records.
State adoption of annuity best interest rules based on a suitability model update developed by the National Association of Insurance Commissioners may be accelerating.
Maine recently became the 15th state to move to the NAIC’s model, when the Maine Bureau of Insurance adopted a regulation based on the model update.
The list of other states that have signed on, by adopting regulations or passing laws, includes Montana, Texas, Alabama and Virginia, according to the American Council of Life Insurers (ACLI).
The ACLI and the National Association of Insurance and Financial Advisors have put out joint letters welcoming the recent flurry of NAIC suitability model update adoptions.
The NAIC model update sets a “best interest” standard for annuity sellers, meaning that sellers must put customers’ interests ahead of their own. The measure is structured as a revision of an existing annuity sales standards regulation. State insurance regulators worked to make the model compatible with the U.S. Securities and Exchange Commission’s Regulation Best Interest, or Reg BI.
The model requires annuity sellers to show that they have acted in the best interest of the customers, but it permits the sellers to collect sales commissions and participate in some kinds of sales contests.
