Regulator: Annuity Sales Regs Are Going Great In 49 States

BOSTON -- The ongoing drafting of annuity sales regulations should end up in a good place - in 49 states, said Iowa Insurance Commissioner Doug Ommen.

Ommen participated in a regulation session Monday at the LIMRA 2019 Annual Conference. He sits on a National Association of Insurance Commissioners' working group that is finalizing an annuity sales model law for states to adopt.

The entire industry fears a "patchwork" of standards that vary from state to state.

"I think that we will end up in a good place with the 49 states," Ommen said to a few knowing chuckles. "I don't know about New York."

Moved Too Fast

The Empire State has frustrated many in the industry with its Regulation 187. Regulators there did not wait for the NAIC to finish a model standard. Instead, New York passed a tough best-interest standard that took effect Aug. 1 for annuity sales. Life insurance sales will be covered on Feb. 1, 2020.

New York probably charged ahead too fast, Ommen suggested.

"I think that they went early and by going early they don't have the benefit of what we've learned through our process," he said of the 18-month working group deliberations. "Maybe by the benefit of time, they'll find a different approach."

The existing suitability standard for annuity sales has worked very well, Ommen said, but the Securities and Exchange Commission was not going to stand for it. So if the states, 49 of them anyway, can join the SEC, and likely the Department of Labor, in passing best-interest rules that harmonize, the industry will be well served, he added.

He called it "a risk issue" for insurers and their partners in distribution.

"I think it's very important for companies to be able to have some consistency in distribution so that they're not in a position where they're facing litigation and they're held to a best interest standard for their securities distribution and they're trying to explain to a jury why they don't give similar treatment to their distribution through independent insurance agents," Ommen said.