Annuity innovation and regulation

Eric Marhoun, COO, Nassau Reinsurance and who is actively involved with several organizations that lobby for the annuity industry, discusses regulations affecting annuity sales and distribution and innovation.

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Interview Transcription:

Paul Feldman:

Hello everyone. I am Paul Feldman from InsuranceNewsNet, and today I'm joined by Eric Marhoun, the new COO of Nassau Reinsurance. So, congratulations on that. We're here at the NAFA Annuity Forum here in D.C., and Eric and I are sitting down and have this great opportunity to talk regulation and industry and all kinds of things.

Marhoun:

Thank you for the opportunity, Paul.

Feldman:

Absolutely.

Marhoun:

It's good to be here and have a chance to be questioned, because usually nobody really wants to talk to me or ask me questions. Most of them get tired of hearing from me, so this will be great.

Feldman:

Well, good. Let's get your voice out there to all the industries. So one of the things, there's a lot of regulation that's happening right now in this industry. Threats of regulations. There's a lot of changes coming down the pike. And I know that you're actively involved in all of this. You're with the FACC.

Marhoun:

Yes. Member of NAFA. Member of FACC, Federation of Americans for Consumer Choice, and Chief Distribution Council at Nassau. We're very committed to a distribution of annuity and guaranteed products to be in the marketplace to offer people choice. Big supporter, longtime supporter of NAFA as well.

Feldman:

We've crossed paths many times over the years, and your name has been brought up many times.

Marhoun:

And it's interesting, you've observed it here, Paul, the pace of regulatory change or regulatory proposals. We, like so many members of the industry, are very supportive of the NAIC's best interest regulation that compliments, if you will, what's being done in the securities industry. Some regulation, obviously, we oppose as out of place, such as DOL's rule making. But I think that agents are embracing and distribution's embracing appropriate regulation. I think it makes the marketplace better, to a point. But obviously, there are some battles and some education that we conduct, depending on different hats that we wear.

Feldman:

So before we get into that, tell me a little bit about you and Nassau and about your company.

Marhoun:

Well, Nassau is sponsored by Golden Gate Capital, one of the firms that's interested in the space of offering guaranteed annuity insurance products. We are associated with the old Phoenix Life, although really more with their national business based out of the New York entity. And since about 2016, we've been slowly rebuilding. Until 2020, I was at Fidelity in guaranteed life, but I've always had a relationship with the people who have been the founders of Nassau. And we see it, as so many other investors do, as a good market to be able to help Americans plan for retirement. And we have some legacy variable products, but our focus is more on guaranteed products.

We also do have an affiliated investment arm trying to find the most prudent, efficient, and effective way to prudently manage the assets that back our direct guarantees to consumers. But it's interesting to see the change in distribution. There's so many more distributors who are dually registered, some as investment advisors or brokers as well as agents, and offering a variety of products to consumers. It's interesting to see the advent of things like registered index-linked annuities, RILAs. So many consumers are looking for the right mix between investment and guarantee returns. And it gives the chance in industry to be innovative. It's also been exciting to see, not that I understand it as well, some of the apps, some of the technology that's out there to help agents.

Feldman:

What kind of technology would you say?

Marhoun:

Well, we at Nassau and in the Hartford area, we're based out of Hartford, try to incubate ideas. But just ways for agents to have apps that make it a little easier to write business, the various tools for calculating how annuities might meet their needs. Frankly, a lot of it, I'm not very tech-savvy. It's over my head.

But it's interesting. You meet with some of the IMOs here and how they're looking to provide service to agents and reps by making them able to do their job more effectively. And that's become, it seems like, one of the more competitive tools, if you will, to try to attract agents. Thank goodness I don't have to run an IMO.

Feldman:

It's a lot of work.

Marhoun:

It takes a lot of ideas, a lot of relationships.

Feldman:

And it took a lot of employees from carriers. So the carriers don't have to employ as many people as they once... I remember when I first got into the business, you get an insurance company, they had multiple floors and buildings.

Marhoun:

And now, there's so much outsourcing. I was meeting with one IMO, and they've been in the business a while, and they have 65 full-time employees. That's almost two floors in our building these days.

Feldman:

It's wild how the industry has changed and companies really became product manufacturers. They were also the manufacturer and the processing center, so that outsourcing created a huge distribution system.

Marhoun:

And it's interesting to see all of the interplay. We're all looking for ways to support our business better. And that can take a lot of time, just trying to figure out what is the best technology platform. And some of us, of course, are just stuck with old technology platforms for some of our business. But it'll be interesting at the conference to learn a little bit more about what's emerging and happening. We've seen it's a tale of two cities when it comes to the federal regulators. The SCC has come out with best interest regulation. It applies to brokers. We do need to be vigilant, because sometimes, it just adds unnecessary cost and expense. And you hate to see that rise to the level where it impedes consumer choice and the benefits that they can receive, sitting here in our nation's capital.

Feldman:

So what are some other issues that agents, advisors, IMOs, distribution, everybody should be concerned with at this moment? Things that are maybe just rumblings?

Marhoun:

Well, one of the things that I think we should always be sensitive to is the value of tax deferral as it relates to annuity and insurance products. And I do think sometimes we as an industry are only vigilant about that when there's an active budgetary process in Washington. I really think we should be a little more constantly, if I may say that, vocal about that. It seems like every time there's a budget bill or a tax bill, they try to change the tax treatment of insurance products, which is improper. People relied upon these products to plan for retirement and life events such as a death. And I find it a little counterproductive that Washington always tries to serve, "Well, maybe we're going to tax those." And then we all get up in arms and we usually beat it back, but I think it should be almost a theme for every meeting in Washington. We should have almost regular outreach there, so that we don't have to educate people just because it's reached a crisis.

So that's one of the issues that I've always felt we, and it's broader than just NAFA, it's the whole industry should do a better job of, so we're not always just doing it whenever comes up-

Feldman:

Like whack-a-mole.

Marhoun:

Right. We should be whacking that mole twice a year, every year. I think that's important to help protect the value these products bring to consumers. And as agents, companies, there's always the theme of us needing to embrace technology more. A lot of agents do it. Social media is a new persona in American culture that they take advantage of. But so many companies now are also seeing great success with eApps. It's so much more efficient, you can do things more quickly.

Feldman:

Well, you would think that they would've done this a long time ago, because the mortgage industry. I bought a house 10 years ago, 15 years ago, and I had a DocuSign.

Marhoun:

And it seems like it's really turned the corner in the last three to four years, but it's been a long time coming.

Feldman:

Especially a 60-page app, or however big they are.

Marhoun:

It'd be interesting if there was a regulator sanction study to look at. Can't we make opening accounts a little easier? And there is one complaint that we hear of all the time, and maybe we as an industry should look at more, is how long it takes when you might be moving from one company to another. We hear that a lot from agents. So we have an eApp, and then it hits the replacement process and it's a Stone Age app.

Feldman:

But well, money moves so efficiently today. And why doesn't that move? And some people would say it's the carriers or the financial institution is holding onto that money as long as they can to earn as much as they can on it right before releasing it.

Marhoun:

And maybe it's something we need to look at. It may be more a function of, with all the activity out there, it's the least prioritized, but-

Feldman:

It would take everybody that necessarily come in were significant part or a regulator.

Marhoun:

But it might give us a better reputation in that regard if we'd be a little more like the securities industry. Because as you point out, money moves so fast otherwise.

Feldman:

It doesn't make any sense other than they're making money on the flow.

Marhoun:

Or it's deprioritized in the realm of transactions.

Feldman:

Or they're maybe-

Marhoun:

And the reality is, there are some ways in which regulators, maybe some more than others, do make it a difficult process. But I think we should maybe bear that in mind for the next generation.

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Paul Feldman started the website InsuranceNewsNet in 1999, followed by InsuranceNewsNet Magazine in 2008. Paul was a third-generation insurance agent before venturing into the media business. Paul won the 2012 Integrated Marketing Award (IMA) for Lead Gen Initiative for his Truth about Agent Recruiting video and was the runner-up for IMA's Marketer of the Year, a competition that includes consumer and B2B publishing companies. Find out more about Paul at www.paulfeldman.com.