A state insurance regulator panel is set to develop guidance for states on adopting the best-interest annuity sales model law formalized earlier this year.
The National Association of Insurance Commissioners revisions to the suitability in annuity transactions (#275) model law were adopted in February. Since then, Arizona and Iowa have adopted the rules, which establish a best-interest standard that aligns with rules being considered by other agencies.
Industry representatives predicted swift adoption of the rule in many states and promised aggressive lobbying to nudge others to pass the rules. So far, that hasn't happened.
"Questions have come up in the states regarding implementation of a model," said Jillian Froment, director of the Ohio Department of Insurance and chair of the Life Insurance and Annuities Committee. "Given the second part of the working group's charge, which was to consider how to promote greater uniformity across across NAIC member jurisdictions ... it would be helpful for the working group to continue to try to develop guidance as to implement the revised model."
Doug Ommen, Iowa insurance commissioner and the author of much of the best-interest model language, agreed to chair the Annuity Suitability Working Group effort to produce the guidance. The working group is slated to meet virtually July 29 at noon as part of the NAIC summer meeting.
The model articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation.
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.
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