Insurance company executives reported minor disruptions Thursday to agents and distributors two weeks into the first phase of the Department of Labor’s fiduciary rule.
Sales of annuity products were still “flowing in” from agents selling annuities into retirement plans, said Ray Wasilewski, chief operating officer, Life Companies, for FBL Financial Group.
FBL is a top seller of insurance in the Midwest. One of the company’s annuity products, however, was suspended as the commission was too low and it made no sense to raise the commission on it, Wasilewski explained.
“All of our products in qualified plans are DOL-ready,” he said.
FBL executives spoke during a morning panel at the fourth annual Des Moines Insurance Conference.
The DOL fiduciary rule, which raises investment advice standards into retirement accounts, requires that agents earn reasonable compensation and that commission structures remain more or less level across similar products.
FBL Financial operates under the Farm Bureau Financial Services brand, whose primary subsidiary is Farm Bureau Life Insurance Co.
Some of Farm Bureau Life’s annuity sales processes are still being done manually, company executives said. If the rule remains, those processes will be fully automated by Jan. 1 when the full rule is slated to go into full effect. The second phase of the rule will require greater compensation disclosures and a contract between advisor and client to sell certain annuities.
For the most part, the DOL rule hasn’t affected the way agents do business in part because Farm Bureau sells through a multi-line captive agency system said CEO Jim Brannen.
Companies that rely on agents only licensed to sell life insurance are in a more difficult spot.
Independent Agent Channel
For insurers with large sales volumes conducted through independent agents, the fiduciary rule will force agents to make some changes to sell fixed indexed annuities (FIAs).
Agents will be able to sell FIAs under the 84-24 exemption until the end of the year, after which they will have to sell FIAs under the Best Interest Contract exemption.
Agents will have to apply more diligence to record-keeping and disclose conflicts of interests – issues likely to give some agents discomfort, said Ron Grensteiner, president of American Equity Investment Life Insurance Company.
There will be some disruption “but it’s just a matter of time before they make the changes and get used to the adjustment,” he said.
American Equity is a top seller of FIAs.
Broker-dealers are trimming the roster of companies on their “approved shelf,” and American Equity’s Eagle Life subsidiary, which sells annuities into banks and broker-dealers, is on many of those approved lists even if American Equity isn’t, Grensteiner said.
“We continue to work with more boots on the ground at Eagle (Life),” he said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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