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New draft guidelines could affect just how tough state regulation of annuity sales will be.
The Life Insurance and Annuities Committee, an arm of the National Association of Insurance Commissioners, plans to consider adoption of an "Annuity Best Interest Regulatory Guidance and Considerations" document Tuesday at an in-person meeting in Hollywood, Florida.
The guidance is intended to help state regulators use the new "best interest" annuity sales rules included in a recent update of the NAIC's Suitability in Annuity Transactions Model Regulation.
Some state regulators want the guidance to help states ensure that annuity sellers treat clients well.
Groups for annuity issuers and sellers want the guidance to reduce the odds that annuity sellers will have to cope with state and federal regulation at the same time.
What it means: The guidance could have a big effect on how agents, brokers and advisors who help clients with annuities do their work.
The National Association of Insurance Commissioners: The United States leaves regulation of the insurance industry to the states.
The NAIC, which helps state insurance regulators share resources, cannot set state rules itself, but states often start with NAIC models when developing regulations.
The U.S. Securities and Exchange Commission already has the authority to police variable annuity sales, because Congress has classified that product as a security.
Congress included a provision in the Dodd-Frank Act that could have given the SEC oversight over fixed annuities if states had failed to develop tougher, uniform annuity sales rules.
Thanks in part to that provision, 49 states have adopted the NAIC's model update, while New York has adopted tougher regulations based on a fiduciary standard.
Sales standards: In the past, agents and brokers who helped clients with annuities came under a "suitability standard." Annuity sellers were supposed to make sure that the annuities they offered suited clients' needs.
Consumer advocates, many financial planners and policymakers including Sen. Elizabeth Warren, D-Mass., have argued that annuity sellers should meet a "fiduciary standard." Doing so would require annuity sellers to put clients' interests first.
Annuity professionals who come under a fiduciary standard could face lawsuits if the annuities they recommend perform poorly.
The NAIC tried to find a middle path, by adopting an annuity sales standards update based on the SEC's Regulation Best Interest that requires annuity professionals to act in the "best interest" of the clients.
Regulators, industry groups and consumer advocates are still debating what "best interest" means. Some want a best interest standard to be more like the old suitability standard and some want it to be more like a fiduciary standard.
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