Gaining access to annuity buying information is about to become easier. The National Association of Insurance Commissioners (NAIC) decided to make its recently updated Annuity Buyer’s Guide available to consumers and the industry, via download any time — without quantity restrictions or fees.
That is according to the National Association for Fixed Annuities (NAFA), which has been in contact with NAIC on this.
Many consumer information brochures are available by way of 24/7 download, and consumers could always download one free copy of the annuity guide. So this might not seem to be anything out of the ordinary.
But having open, repeatable, no cost access for consumers and industry? That’s new.
The story behind the change provides insight into how broader approaches sometimes unfold in the industry. Here the clue: It takes a little help from technology, and some ongoing tête-à-têtes between industry and regulators.
For the record, the correct word for the consumer brochure is “guides” — in the plural — not guide. That’s because the updated brochure is available in three formats: for fixed annuities, variable annuities, and both fixed and variable annuities. But the NAIC refers to it in the singular - guide.
Here’s the back story. NAIC has kept strict control of the licensing of the copyrighted document since publication of the first version in the late 1990s. Consumers have been allowed to obtain one copy free from NAIC but carriers had to pay for the printed copies they distributed to consumers.
That created a revenue stream for NAIC, but a significant hassle for annuity writers, in addition to some avoidable costs.
Some carriers worked around buying the guides from NAIC by printing copies of the guide that they found on the websites of certain states. Some states have the Annuity Buyer’s Guide in their annuity legislation, so the guide gets posted online, explained Kim O’Brien, executive director of NAFA.
This “print-it-ourselves” workaround did not sit well with NAIC, O’Brien recalled. But the annuity carriers asserted their right to print the material that way, because it was now in the “public domain” via those state websites.
Fast forward to earlier this year. That’s when the newly updated guide became available. “NAIC said there could be no use of public domain,” and that the carriers would have to buy licensing agreements for each guide they distribute to a customers, whether electronic or print, O’Brien said.
That opened up many questions: What does it mean to “print”? What constitutes “download”? What if one download doesn’t work or gets interrupted — does going back and trying again count as another download? How will this affect consumers?
To keep track of downloads, will the carriers have to put the guide behind a password-protected area of their websites? If so, and if agents want to access the guide while working with a client, how would that work?
There were also questions about use of third-party contractors to distribute the guides as part of the carriers’ policy issue function.
Underlying those questions was a regulatory requirement in the NAIC Annuity Disclosure Model Regulation. This essentially states that consumers must be given the guide in conjunction with their annuity application process.
This disclosure provision is aimed at helping buyers understand the type of product they are selecting.
Since carriers are required to provide the guide as part of the disclosure process, carriers wondered why there are so many hoops to go through in order to make the guide available.
O’Brien said NAFA began talking with NAIC, on behalf of its members, about these things. “Our members want to comply, but they’ve found it impossible due to all the restrictions,” O’Brien said. Some members characterized the restrictions as “anti-consumer,” because it is “too difficult for carriers and agents to get the guide in the hands of the customer.”
That’s the exact opposite of the intended goal, she added.
Apparently, the ongoing discussions got results. NAIC recently notified NAFA that NAIC will be removing the Annuity Buyer’s Guide from its revenue stream, O’Brien said. “It will allow the public to access the electronic version with no restrictions and no cost.”
Also, she learned that the carriers will no longer have to buy the print version from NAIC. “They can print it themselves if they want, with the NAIC copyright included, or they can buy the guide from NAIC inventory at a discount.”
Twelve states have already adopted the updated version of the guide, so once NAIC sets up its new downloading system for the Annuity Buyer’s Guide, agents and customers “can download that new version whenever they want, as many times as they want,” she said.
Maybe by January
The start-up date is not yet set, but it might begin sometime in January, she said, citing some comments by NAIC staffers.
In her view, “the consumer won with this, and the industry trade associations won with this.” She pointed not only to NAFA but also to American Council of Life Insurers and Insured Retirement Institute, all three of which were actively involved in NAIC’s guide update process.
“It’s not that NAIC lost,” she added. “But now the distribution of the guide is aligned with the intent.”
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