California Gov. Newsom signs best-interest annuity sales bill

California Gov. Gavin Newsom gave industry trade groups a big win Thursday by signing a best-interest annuity sales bill into law.

California becomes the 45th state to pass the best-interest model, based on a framework put forth by the National Association of Insurance Commissioners. In addition to being one of the largest economies in the world, California is a liberal state known for its tougher regulations.

Trade groups helped craft the annuity sales bill and are ecstatic that Newsom signed the legislation.

Lawmakers took 'strong stand'

"California lawmakers took a strong stand today with the objective data we’ve seen from Ernst and Young – holistic financial advice provides better outcomes for consumers, and we should be finding ways to continue to expand on this," said Marc Cadin, CEO of Finseca. "Our movement is gaining steam, and we won’t rest until we’ve achieved financial security for all."

Consumer groups had pressured the progressive Newsom to veto the bill and align with the Biden administration on a tougher fiduciary standard. The DOL is expected to publish its fourth attempt at a fiduciary rule this spring. The DOL rule would establish a fiduciary standard for virtually all retirement plan rollovers transactions.

Based on a model passed in 2020 by the National Association of Insurance Commissioners, the best-interest rules are favored and pushed by industry lobbyists who say it will cause the least disruption to business models.

Kevin Mayeux, CEO of the National Association of Insurance and Financial Advisors, called it "a monumental win for consumers."

“Together with the Securities and Exchange Commission’s Regulation Best Interest, which creates a best interest standard for retirement investors in every state, the NAIC model offers robust protections and promotes retirement security for American families. NAIFA encourages all 50 states to adopt the NAIC model," he said.

Legislation had roller-coaster year

Sponsored by state Sen. Bill Dodd, D-Napa, the California legislation endured a roller-coaster year in 2023. The bill seemed on the way to passage during the spring of 2023 – sailing through the California Senate in May with no opposing votes at the committee level or from the floor – but industry associations objected to some sections.

For example, the initial version of the California rule would have required a producer to obtain specific personal information from a client before making a life insurance recommendation.

After weeks of discussion with Dodd's office, the Independent Insurance Agents and Brokers of California and the National Association of Insurance and Financial Advisors agreed on language that will "enhance and update the existing Annuity Suitability law and make it the strongest suitability law in the country," according to a June 22 letter from the trade groups.

With the addition of California, the fifth-largest economy in the world, more than 90% of the United States is now covered by the NAIC best-interest standard, the Insured Retirement Institute noted.

“California’s adoption of the NAIC model best interest regulation is a major step forward for consumer protection,” said Wayne Chopus, president and CEO of IRI.

InsuranceNewsNet Senior Editor John Hilton 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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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.