At least four additional states are working to adopt updated best-interest annuity sales rules by Jan. 1, 2021.
The National Association of Insurance Commissioners revisions to the suitability in annuity transactions (#275) model law were adopted in February. Since then, Arizona and Iowa have adopted the rules, which establish a best-interest standard that aligns with rules being considered by other agencies.
The Annuity Suitability Working Group is charged with providing "guidance" to help states more states adopt the model regulation. During a conference call today as part of the NAIC virtual summer meeting, regulators from Idaho, Ohio, Rhode Island and Kentucky said they are working on updating their annuity rules.
"We have some preliminary stuff we have to do before we can put out a regulation," said Elizabeth Kelleher Dwyer, superintendent of banking and insurance for Rhode Island. "And we’re in that process."
States have different different methods for the adoption of regulations. Arizona, for example, required legislative approval for its new annuity regulation, while in Iowa, Insurance Commissioner Doug Ommen's department was able to issue rules on its own.
"By and large the answer is no, we did not receive opposition" from lawmakers, Ommen said in response to a question.
Information On The Way
Iowa plans to issue a bulletin on its new rules soon, he added. Likewise, the NAIC staff is working on a set of frequently asked questions. Ommen cited both as examples of information that will help state insurance departments and legislators with their own adoption processes.
The model articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation.
The new regulations will commit the agent to extra work and documentation to establish the consumer's profile. Agents will need to find out and document things like a consumer's financial situation, insurance needs and financial objectives.
The rule specifically does not establish a fiduciary duty, nor does it ban agents from recommending products with a higher compensation structure. But the agent must be able to show that such a recommendation is in the consumer's best interest.
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.