Financial Literacy Education Not NAIC’s Bailiwick, Advocate Says

By John Hilton

Who should be filling the role of providing financial literacy is unclear, but a pair of academic experts say it should not be state insurance regulators.

"We think financial education is important, but that many other groups are better situated to design, deliver and evaluate education than NAIC is," said Brenda Cude, professor, family & consumer sciences, University of Georgia.

Cude spoke during a conference call for the National Association of Insurance Commissioners' Retirement Security Working Group. The Life Insurance and Annuities Committee established the working group during the NAIC Summer Meeting in New York City in August.

Stephen Taylor, insurance commissioner for the District of Columbia, is serving as the working group’s first chairman.

So far, the group has held a few calls, mainly to gather information. Cude was joined on last week's call by Karrol Kitt, professor emeritus at the University of Texas. Both are NAIC consumer representatives.

"We think your most important role is to ensure that insurance markets are stable and competitive, especially for products that consumers might use to secure their financial futures later in life," Cude said. "And NAIC's primary role in terms of education is to step up his effort to provide well-designed, consumer-tested information, education and disclosures that have value to consumers at that teachable moment when they're shopping for insurance products."

Education Is Sketchy

Cude provided a glimpse into public school education of financial literacy and said it varies greatly. She provided these statistics from the Council on Economic Education Survey of the States:

a. 45 states include personal finance in their education standards
b. 38 states require the standards to be implemented
c. 24 states require that high school courses that teach personal finance be offered
d. 19 states require students to take courses that teach personal finance
e. 7 states require that students are tested after taking courses that teach personal finance

"But I would have great doubts about the ability of an 18-year-old to really be interested in a lot of this content beyond the auto or renter's insurance information that they might be applying in the very near term," Cude said.

In Georgia, every high school student is required to take a semester of economics, she noted. They're required to take an end-of-the-course test and pass the course in order to graduate.

However, there are far too many even basic finance concepts to be adequately covered in a one-semester course, Cude explained.

"So I know that teachers are going to teach what they know and what they're interested in and what they think their students are interested in," she said. "And I'm going to guess that insurance will be one of the items that get short changed in this instruction."

'Already Going On'

The educators urged the regulators to find a niche role within what is already happening to spread financial literacy education.

"We'd like to see NAIC and those of you in the states to form partnerships or work with existing initiatives," Cude said. "The best resource I found for state initiatives is the NCSL (National Conference of State Legislatures) website, which identifies states that have coalitions typically called financial literacy councils.

"If your state has something like this, we encourage you to be engaged. If your state has personal finance education standards, we encourage you to be engaged."

So far, the working group has not found an issue it can jump into.

Taylor has suggested things the group could undertake, such as developing a continuing education (CE) component requirement for producers that includes needs analysis and suitability, including a draft of 30 new exam questions.

Likewise, Taylor suggested developing an anti-fraud program, facilitating a forum for the industry to communicate, and even partnering with the Interstate Insurance Product Regulation commissioner for the purpose of developing new lifetime income products.

The working group's charge is to "explore ways to promote retirement security."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.