The National Association of Insurance Commissioners moved one step closer today to sending a best-interest annuity model law to the states for adoption in 2020.
The Life Insurance and Annuities (A) Committee voted 11-1 to pass the annuity sales standard on to the NAIC Executive Committee and Plenary. The executive committee could take the final vote on the annuity rule changes early in 2020.
The model articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation.
The A Committee held a conference call today to take a final pass at language in the rule. Most of the final language changes went through without comment. New York cast the lone No vote without comment.
New York adopted its own tough standards that took effect for annuity sales on Aug. 1, 2019 and for life insurance sales on Feb. 1, 2020. New York regulators have repeatedly pushed the NAIC for tougher annuity rules and to cover life insurance sales as well.
NAIC regulators have mostly ignored New York's suggestions.
The best-interest standard is one the industry has said it can live with as a compromise standard.
“This important proposal will significantly enhance protections for Americans planning and saving for the future. It reflects regulators’ deliberative and thoughtful approach, including receiving input from consumer and industry groups such as ACLI," said Bruce Ferguson, ACLI senior vice president, state relations.
“Retirement savers should be confident that financial professionals are acting in the best interest of consumers," he added. "The proposal the committee approved today achieves this goal and will be more effective than individual state fiduciary proposals that miss the mark on protecting consumers."
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.