NAIC Working Group Balks At Tough ‘Best Interest’ Annuity Rule

CHICAGO -- The New York-California faction made a big push to beef up a proposed state insurance commissioners' annuity sales rule, but the effort fell short when working group members rejected "best interest" language.

The Annuity Suitability Working Group took all of its scheduled five hours today to finish a section-by-section review of the model rule -- a process that began May 31 at a special meeting in Kansas City.

Members re-convene at 8 a.m. Tuesday to start from the top and iron out lingering disagreements. Chairman Dean Cameron steered competing conservative and liberal factions through the rule via a series of "straw poll" votes.

A substantial chunk of Monday's session was spent debating this sentence in a larger section proposed by Tennessee: "a producer ... shall not place the producer's or the insurer's financial interest above the consumer's interest when making a recommendation of an annuity product."

The section was ultimately adopted with slight tweaks. California and New York voted against adoption.

James Regalbuto, New York deputy superintendent for life insurance, repeatedly pushed for verbiage his state has already adopted: "the only consideration can be the consumer's best interest."

"The original goal was to go beyond a little bit where we were with the existing suitability," Regalbuto said. "The goal was to go a little bit further and address some of the conflicts."

Iowa Insurance Commissioner Doug Ommen strenuously disagreed, telling members that "as a regulator ... I have a real problem" with best-interest requirements. The difficulty is defining what it means and how to apply across the various agent-broker-registered rep network of differently licensed sales people, he added.

"I think it creates substantial liability," Ommen said. "When I look at the market we regulate, I just don't see that 'best interest' is going to be the answer."

'Somewhat Naive'

Humphrey, who reminded members in Kansas City that they will need a rule that can pass their state legislatures, clearly saw the Tennessee language as a middle ground.

"We're trying to get to a place where we can put the consumer ahead," he said.

Instead, it seemed that nobody in the Marriott ballroom was happy. The meeting is being attended by representatives from most of the major carriers, such as Allianz, MassMutual, Pacific Life, Jackson National and Brighthouse Financial, along with various trade association members.

"It's somewhat naive," said Wesley Bissett, senior counsel for government affairs for the Independent Insurance Agents and Brokers of America, of the best-interest idea. "It's subjective ... and impossible for regulators to determine. What do you do if you're an insurance agent?"

After a break, Regalbuto had the final word, and a warning for the group: "They want the producer to consider what is best for themselves and then run around and say they support 'best interest.' We should make it clear what we're voting on today. We're voting to allow producers to make recommendations based on what they consider to be best for themselves."

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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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.