It is no secret that when the Department of Labor released its offensively framed and substantively very bad fiduciary rule at the end of last year, 2024 would start with a bang — and not in a good way. But it is not only federal activity you should watch as we barrel into the new year. State legislators and regulators have plenty of items on their plates as they work to address long-term care, taxes and standards of conduct. Here is an overview of what we are watching this year.
Standards of conduct
Standards of conduct are not only being discussed at the federal level. In 2020, the National Association of Insurance Commissioners adopted the Annuity Suitability & Best Interest Standard (Regulation No. 275).
Since NAIC displayed that leadership, 40 states have adopted the standard, with five working through adoption and the last few planning to begin the legislative or regulatory process in 2024. Adopting this model has shown and will continue to show what can be done when regulators and the industry work together to protect consumers while ensuring continued access to advice.
Although New York Regulation 187 (Suitability & Best Interest in Life Insurance & Annuity Transactions) is different from the NAIC model regulation, Finseca will continue to address some of our key concerns with this. Meanwhile, California is expected to adopt its version of the best interest standard for annuities in its 2024 legislative session. \
NAIC activity — artificial intelligence and privacy
The NAIC ended 2023 with the unanimous adoption of a Model Bulletin, “Use of Algorithms, Predictive Models, and Artificial Intelligence Systems by Insurers,” and will begin working through another draft of the Insurance Consumer Privacy Protection Model Law (No. 674). The NAIC will announce letter chairs in the coming weeks, which will determine other priorities going into 2024. However, AI and privacy activity aren’t limited to the NAIC, and several states will move forward with legislation or regulations in both spaces in 2024.
National Council of Insurance Legislators
NCOIL will continue to review and develop model legislation that will further consumer access to advice and preserve state jurisdiction over insurance. We expect NCOIL to continue to lead and educate policymakers on key initiatives throughout the year.
Washington was the first state in the nation to adopt a state-funded long-term care program, and adjustments and tweaks to that program are expected to be made throughout the year.
Issues such as portability, attestation of coverage and expanding coverage beyond the $36,500 benefit remain unsolved. California’s Long Term Care Insurance Task Force is being closely watched to see whether there will be any legislative reactions following its report on the actuarial analysis of potential solutions for long-term care.
Keep an eye on states such as Minnesota, which just released its long-term care report that takes a different approach from what we have seen in Washington and California. Massachusetts is expected to put out a request for proposals on the same issue this year.
Whether they lean red or blue politically, states will continue to discuss long-term care. Finseca has put together a long-term care task force focused on ensuring the products the profession already offers are part of the solution, whether states are considering tax incentives or state-funded programs.
Recruitment, retention and diversity
As the average age of people in the financial services profession increases, Finseca will continue to advocate for initiatives that will encourage a more diverse group of individuals to join the profession and increase the retention rate of those who are in their first five years as an advisor. We face a $7 trillion gap between what people have saved for retirement and what they will ultimately require, and also a $12 trillion life insurance coverage gap.
One of the key ways to address these gaps is to have more people serving the individuals who need financial protection the most. Eliminating pre-licensing hours, allowing producer exams to be conducted in more than one language, continuing online proctoring of exams and encouraging mentorship programs are some of the initiatives Finseca will work on with legislators and regulators throughout the year to address our recruitment, retention, and diversity needs.
You have already seen it in the news, but this is a major election year, and elections will be in the back of legislators’ and regulators’ minds as they consider various pieces of legislation and regulations. This will spur some more controversial actions that could hinder election votes, but those items that may not see movement in 2024 will likely come back to the forefront in 2025.
Finseca will work with our joint trade associations (American Council of Life Insurers, Insured Retirement Institute, National Association of Insurance and Financial Advisors, National Association for Fixed Annuities, and more) to have a united voice regarding joint legislative priorities toward financial security for all.