The Iowa Insurance Division adopted a best interest rule applying a new standard to the sale of annuities and other insurance products.
The new rule is based on a best-interest model rule adopted by the National Association of Insurance Commissioners. It also follows requests to delay the adoption of the best interest standard on securities.
Insurance executives are generally happy with the Iowa rules, which imposes obligations of care, disclosure, conflict of interest and documentation on producers selling products in the state.
“Iowa is setting the pace for states in adopting enhanced, harmonized protections for consumers who purchase annuities for lifetime income," said Susan Neely, president and CEO of the American Council of Life Insurers. “Retirement savers should be confident that financial professionals are acting in the best interest of consumers. The new rule achieves this goal."
Iowa regulators considered delaying adoption of the new standard in light of COVID-19, but decided to proceed with insurance rules, said Insurance Commissioner Doug Ommen, who was instrumental in crafting the NAIC model law language. The state expects to propose best-interest securities' rules this summer, he added.
Jason Berkowitz, chief legal and regulatory affairs officer for the Insured Retirement Institute, credited Iowa regulators for making progress on annuity rules, and also "for recognizing the need to step back and re-evaluate the proposed best interest standard for broker-dealers."
Iowa becomes the first state to adopt the NAIC best-interest model law.
“Iowans expect their financial professional to act in the consumer’s best interest when recommending an annuity. Iowa not only expects it, but we will require it," Ommen said. "I hope to also work with other U.S. insurance regulators to require the same of any Iowa insurer writing annuity business in those states."
The final rule is expected to be published in the Iowa Administrative Bulletin on June 3 and take effect on Jan. 1, 2021. Enforcement of the rules is in the hands of the insurance commissioner.
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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