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Life Health > Annuities > Fixed Annuities

NAIC Fills in the Annuity Suitability Passage Map

By Allison Bell

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Forty-five states have now adopted the annuity sales standard update developed by the National Association of Insurance Commissioners, and three other states — Missouri, Nevada and New Jersey — have update adoption efforts pending, according to a new map developed by an NAIC team.

New York state has adopted another annuity sales standard.

Louisiana and the District of Columbia are the only jurisdictions with no annuity standard update adopted and no known adoption effort pending.

The Annuity Suitability Working Group, an arm of the NAIC, posted the latest version of the update adoption tracking map on its section of the NAIC’s website Monday.

What it means: The United States is six jurisdictions away from having what could be a uniform set of annuity sales standards.

Background: The effort to pass the NAIC’s annuity sales standard update is part of a decades-old move to tighten U.S. annuity sales standards.

The saga affects sellers of fixed annuities and non-variable annuities much more than it affects sellers of traditional variable annuities or registered index-linked annuities, because the SEC already regulates traditional variable annuities and RILA contracts as securities.

The U.S. Labor Department has revived efforts to set a fiduciary standard of care, which would require annuity sellers helping clients roll assets over from 401(k) plans or individual retirement accounts to put the clients’ interests first.

The standard might block uses of commission-based compensation and might expose annuity sellers to risk of lawsuits, even if the annuities performed as promised, if the annuities’ performance turned out to be worse than the performance of some competing products.

The NAIC packaged its own annuity sales standards measure as an update to an older set of annuity sales standards, the NAIC’s annuity suitability model.

The update is designed to complement the U.S. Securities and Exchange Commission’s Regulation Best Interest.

Reg BI requires annuity sellers to act in the best interest of the consumer. It requires the sellers to disclosure conflicts of interest but does not prohibit use of commissions.

Regulators believe that a provision in the Dodd-Frank Act may keep the SEC from seeking to regulate non-variable indexed annuities or other annuities as securities if states adopt strong, uniform annuity sales standards.

Credit: Andy Dean/Adobe Stock

Allison Bell

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