Massachusetts Adopts Annuity Sales Regulations

Massachusetts has adopted an annuity sales standard update developed by the National Association of Insurance Commissioners.

The state Division of Insurance published the Suitability in Annuity Transactions regulation changes in the Massachusetts Register Friday.

At least 30 states have now implemented the changes, which are based on the U.S. Securities and Exchange Commission’s Regulation Best Interest. Similar updates are pending in seven other states, according to the Insured Retirement Institute.

The current list of holdouts includes California, Florida, Indiana and New Jersey.

What It Means

If you’re a financial professional in Massachusetts, you might face customer profiling requirements, and you might have to complete a training course by June 1.

The Background

The original annuity suitability rules required an annuity seller to verify that the annuities recommended to a customer suited the customer’s needs.

The NAIC suitability update requires sellers to show that they have considered a wide range of annuities, acted in the best interest of the consumers involved, disclosed conflicts of interest and documented their actions.

Reactions

Susan Neely, the president of the American Council of Life Insurers, and Josh O’Gara, the president of the National Association of Insurance and Financial, put out a joint statement welcoming Massachusetts’s adoption of the annuity suitability update.

“We hope other states add to this nationwide effort and adopt these sensible protections,” Neely and O’Gara said.

Neely and O’Gara said allowing the use of sales commissions, rather than requiring client-paid fees, will keep annuities affordable for middle-income consumers.