As many as 14 states want to put a "fiduciary duty" on insurance agents via new regulations, an industry spokeswoman said today.
The regulation chatter is heaviest in big, populous states where progressives are in key political posts -- such as California and New Jersey, said Kim O'Brien, CEO of AssessBEST, a compliance software company.
O'Brien hosted an industry webinar today for the Fixed Annuity Consumer Choice campaign. The group is planning a full offensive to counter the best interest/fiduciary movement, O'Brien told listeners.
“There’s a narrative that we have to fix something but there’s no evidence that there’s something that needs fixing," O'Brien said. "The reality is that the annuity market is very strong, and what they’re doing will really harm agents and consumers."
New York is furthest along with a best interest rule that covers annuities and life insurance. It is slated to take effect in August 2019 for annuities and six months later for life insurance.
A pair of lawsuits have been filed to stop the New York rule -- one by The Big I and the Professional Insurance Agents of New York, and one by the National Association of Insurance and Financial Advisors' New York chapter.
The two lawsuits will likely be combined in the coming weeks, said Scott Hobson, director of government relations for The Big I NY. The organization has several concerns, Hobson added, a big one being that New York Department of Financial Services' regulators will be able to "unilaterally" extend the best interest rule to any and all insurance transactions.
With a rule on the books, they could expand it and bypass the normal public comment process, he noted.
'Tremendous Amount Of Legal Risk'
Otherwise, “you’re opening up a tremendous amount of legal risk on agents and brokers," Hobson explained. "We expect that many decisions would be second guessed, resulting in litigation, claims and stuff of that nature."
Big I NY and PIANY called the new standard "wildly subjective" and argues that it fails to instruct agents/brokers whose best interest they must consider; be it the policyholder, beneficiary, or owner of a policy.
A decision on the lawsuit is not expected to take long, Hobson said, with a decision expected by the middle of the first quarter of 2019.
The next battleground might be New Jersey, which published a "pre-proposal notice" in October and is seeking comments. The New Jersey plan is short on details but would impose a fiduciary duty on all investment professionals in the state.
Dwight Carter, who runs an annuity marketing organization in Raleigh, N.C., and chairs the FACC, said it will be a big year for annuity sellers to fight against being demonized.
"We have some work to do," he said. "The New York situation is a forerunner on what we’re going to have to deal with. We’re going to be positioned and we’re going to be classified and we’re going to be deemed to be not in the best interest of the consumer."
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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