CHICAGO -- A fierce split on whether to extend annuity sales rules to in-force policies crippled a state insurance commissioners' working group today.
The National Association of Insurance Commissioners' Annuity Suitability Working Group is attempting to craft an annuity transactions model law to present to its parent committee at the NAIC Fall Meeting next month. Working group chairman Dean Cameron all but killed that notion with a somber mid-morning update.
"The work will sort of be left open, but it will provide a framework as a draft the NAIC can use in talks with the SEC, and other states may want to use as they move ahead," Cameron said.
An update will be given at the Fall Meeting, he added, but it will be up to NAIC leadership whether the working group continues to work on the model.
'Cripple And Terrify'
The extended debate, with multiple motions, over the fate of in-force contracts seemed to break the spirit of the group. It became the one issue on which neither side would back down.
It began with the definition of "recommendation."
A rule that does not cover in-force policies leaves consumers with a big protection gap, said James Regalbuto, New York deputy superintendent for life insurance. New York passed a tough rule that applies to annuities and life insurance sales, and all in-force policies.
The in-force issue was broached during the NAIC Summer Meeting and members departed Boston without agreement. Industry representatives were vehemently opposed to the idea.
"Are we going to create a scenario where a producer shies away from responding to consumer inquires about their products … when all they want to do is drop another $500 in their IRA?" asked Steve Toretto, associate general counsel for Pacific Life. "Just dropping this in is going to cripple and terrify the people sitting behind me."
Regalbuto told Toretto the scenario he described would not require a re-collection of suitability information in New York. "We defined it that way," he added.
Iowa Insurance Commissioner Doug Ommen said his experience has not revealed a problem.
"It seems like we’re just sort of hypothesizing different issues," he said. "I just don’t think the case has been made that we should take a supervisory structure that has been based on transactions and extend it to things that haven’t been acted upon."
Both Ommen, the working group vice chairman, and Cameron, opposed the in-force extension.
"I don't want to discourage the periodic deposit of new money into an in-force contract," Cameron said.
Prior splits consistently pitted New York and California against the rest of the group. On the in-force issue, the progressives picked up support from states such as Rhode Island and New Hampshire.
Still, a motion to support carefully crafted language was defeated 7-5 on a roll-call vote.
The group then voted in support of a definition of "recommendation" without the in-force angle.
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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