Arizona is the latest state to consider its own regulation of annuities with a Senate bill that is moving quickly through the Legislature.
Senate Bill 1534 was introduced Feb. 6 and passed out of the Senate Finance Committee Wednesday by an 8-1 vote. The bill moves on to the Senate Rules Committee Monday, a Senate source said.
The bill was pushed by Secure Financial Solutions, a registered investment advisor firm doing business in Scottsdale, Ariz., the Senate spokesman said. The bill enjoys broad, bipartisan support and could move quickly, he added.
Industry officials are hoping to slow down the bill so that both sides can be heard. Americans for Asset Protection, an industry trade association, circulated a petition letter this week to agents and advisors.
"Once again, lawmakers, no matter how well-intentioned, are moving forward without a full understanding of the issue or the marketplace, and without the benefit of that information," said Kim O'Brien, vice chair and CEO of AAP. "We believe the current bill is an over-generalization of indexing methodology and its throwing the baby out with the bath water rather than changing the water."
Most significantly, the Arizona bill bans indices that have not been in existence for at least 10 years for use in fixed indexed annuity illustrations.
As AAP notes in its letter, a National Association of Insurance Commissioners is already tackling this issue.
"Arizona should not move out ahead and alone prior to the NAIC’s final recommendation," the letter reads. "Doing so would provide choice and information to the rest of America while limiting the choices and information available to those living in Arizona."
In addition, the bill requires that the insurer and agent “retain copies of the disclosure document, illustrations and the buyer's guide and all other forms of advertising for the duration of the fixed indexed annuity or 10 years, whichever is shorter.”
What constitutes “all other forms of advertising?” the AAP letter asks. "Is an agent responsible for advertising he or she does not initiate or engage in? Is the insurer responsible for retaining advertising it does not develop, but is created by the agent?"
Several states are in various stages of developing best-interest or specific annuity sales rules. New York has a rule on the books that takes effect in August for annuities and six months later for life insurance.
Nevada and Maryland are also debating rules in their respective legislatures.
The Arizona bill was introduced by Sen. Kate Brophy McGee, a Republican representing District 28 in central Maricopa County. Running for a third term, Brophy McGee's campaign website says she favors "reduced regulations and streamlined operations for Arizona’s financial services industries."
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
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