North Dakota Best Interest Rule Passes Key House Committee

A North Dakota bill to establish a best-interest standard in the state passed a key committee Tuesday.

The bill introduced by North Dakota Rep. George Keiser and Sen. Jerry Klein was unanimously approved by the House Industry, Business and Labor Committee following a morning public hearing.

North Dakota is the latest state to pursue a best-interest standard based on a model law put forth by the National Association of Insurance Commissioners.

In February 2020, the NAIC adopted a model law that articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation. With the outbreak of COVID-19, states were slow to adopt the model in the months that followed.

The NAIC began lobbying state officials last summer, and began work on a series of FAQs to help facilitate adoption. Since then, Delaware, Alabama and Rhode Island introduced rules. Michigan, Arkansas, Maine and Nebraska are also working on rules.

Bruce Ferguson, senior vice president, state relations, for the American Council of Life Insurers, commented during the public hearing today.

“This proposal represents an important step forward in enhancing protections for annuity consumers in North Dakota," he said. "It would make certain that they receive information that is clear, understandable and from financial professionals acting in the consumer’s best interest."

“The proposal adds momentum to the drive for a national standard that will safeguard the best interest of all consumers regardless of where they live."

A coalition of eight trade associations representing different groups within financial services sent a letter in support of the North Dakota bill and urging the full state legislature to adopt it.

The NAIC model rule specifically does not establish a fiduciary duty, nor does it ban agents from recommending products with a higher compensation structure. Consumer advocates say the rule has no teeth and falls well short of true consumer protection.

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.