Final comments are in as stakeholders make a last-ditch effort to sway state insurance regulators on its suitability in annuity transactions model law.
With a Sunday meeting looming before its parent Life Insurance and Annuities Committee, the Annuity Suitability Working Group is preparing to present a tentative draft of its annuity sales model, which the group voted to finalize Nov. 5. The model incorporates a best-interest standard into existing suitability principles. A final comment period closed Nov. 26.
Ideally, the National Association of Insurance Commissioners would approve the model and send it to states for potential adoption in 2020. That process will begin this weekend at the NAIC Fall Meeting in Austin, Texas.
But first, industry reps, trade associations and consumer groups want a final say at several key issues. They include:
• Liability. The Independent Insurance Agents and Brokers of America wants this language: “Nothing herein shall be construed to create or imply a private cause of action for a violation of this regulation” to go further.
The IIABA proposes adding “or to subject a producer to civil liability under the best interest standard of care outlined in Section 6 of this regulation or under standards governing the conduct or a fiduciary or a fiduciary relationship.”
Section 6 is the “Duties of Insurers and Producers” section that spells out the best-interest duties.
• Material conflict of interest. As written, the rule defines a conflict of interest as a financial gain “that a reasonable person would expect to influence the impartiality of a recommendation.”
Conflict of interest “does not include cash compensation of non-cash compensation,” the rule reads. The Center for Economic Justice wants to strike this last line from the rule.
• Best-interest obligation. The IIABA wants to strike “act in the best interest of the consumer” from the best-interest definition. The IIABA supports retaining language holding annuity sellers to “the following obligations regarding care, disclosure, conflict of interest and documentation.”
Meanwhile, CEJ wants to tighten the best-interest definition to a single sentence: “A best interest standard should be defined as a recommendation for a product or products that best meets the consumer’s needs without consideration of the producer’s interest.”
• Care obligations. The Fixed Annuity Consumer Choice Campaign wants language ensuring that agents will not be required to get more licenses down the line, “including but not limited to any securities license,” in order to be compliant with care obligations.
• Sales contests and quotas. The IIABA is asking to strike language requiring insurers “to identify and eliminate any sales contests, sales quotas, bonuses, and non-cash compensation that are based on the sales of specific annuities within a limited period of time.”
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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