The fiduciary standard for life insurance is here

The Department of Labor officially vacated the Retirement Security Rule on March 10, 2026. This move restores the decades-old "five-part test," which narrows the circumstances under which financial professionals must act as fiduciaries.

While we celebrate this decision as an industry, we would be remiss not to note the mindset change that has occurred: elevated standards of care in our industry are here to stay. The smartest financial professionals that I know build their practices on what is best for their clients. They are adopting more transparent and client-first strategies.

How state regulators fill the federal void

While the DOL retreated and the federal fiduciary fight grabbed headlines, state insurance commissioners advanced. Today, all states have adopted the NAIC's Suitability in Annuity Transactions Model Regulation (Model 275-1), which requires producers to act in the consumer's best interest when recommending annuities.

Model 275-1 demands four specific obligations: care, disclosure, conflict-of-interest mitigation and documentation. All these provisions align with SEC Regulation Best Interest and core Financial Industry Regulatory Authority rules.

The message to advisors is clear: federal fiduciary requirements may have evaporated for one-time rollover recommendations, but state-level best-interest standards are alive, enforceable, and expanding.

Follow the money: Reshaping product recommendations

Three years ago, I would have said commission-based life insurance sales were untouchable. Today, I'm watching that model crumble in real time. By 2026, 77.6% of financial advisors will operate under fee-based models, up from 72.1% in 2018.

This isn't just happening at wire houses and registered investment advisory firms. Insurance broker-dealers are taking note of this shift, which may indicate that professionals throughout the industry who will thrive in this new environment are those who will focus even more on a client-first principle.

I recently reviewed product selection patterns from a mid-sized independent marketing organization. Indexed universal life, which hit a record $4.5 billion in sales in 2025, up 17% year over year, dominated among commission-only producers. Meanwhile, fee-based advisors recommended whole life (which grew 7% to $6.4 billion, capturing 37% market share) or term plus separate investment accounts.

The pattern is too consistent to ignore; compensation structures inevitably drive product selection, leading advisors toward lower-complexity products with more transparent value propositions.

Product innovation helps the fiduciary dilemma

While regulators argued about standards, carriers revolutionized life insurance by embedding living benefits directly into base policies. We are actively helping financial professionals integrate these hybrid solutions into broader financial strategies that align with best-interest standards.

I'm seeing this transformation firsthand with my own clients. Approximately three in four American adults have at least one chronic condition, with multiple chronic conditions affecting more than half (128 million) of U.S. adults. Healthcare spending is projected to reach $16 trillion by 2030, yet traditional long-term care insurance remains unaffordable for most prospects I meet. When I tell them their life policy can also fund chronic illness care, the conversation shifts from "Do I need this?" to "How much can I get?"

Many carriers today offer hybrid life insurance policies that tackle multiple client challenges into a single product.

• Death benefit protection for beneficiaries without separate term and permanent policies
• Long-term care funding without standalone LTC premiums
• Chronic-illness acceleration when clients cannot perform two of the six activities of daily living
• Critical and terminal illness riders, often bundled at no extra cost

Industry analysts call 2026 "the year of hybrid" as carriers race to meet the demand for more comprehensive protection. LIMRA data shows millennials express the strongest interest in these multi-benefit designs. It’s a generational signal that living benefits are no longer niche riders but mainstream expectations.

Build a client-first practice

The financial professionals thriving in this environment aren't waiting for regulatory clarity. They're asking hard questions about product illustrations, commission structures and whether a recommendation truly serves the client's comprehensive needs.

The fiduciary standard may not be federally mandated for life insurance, but its client-first principles are reshaping what it means to be a true professional in this industry. And it raises a fair question about whether the old ways of business were ever truly enough.

The clients you serve aren't making small decisions. They're navigating life insurance, income protection and long-term financial security choices that can define the trajectory of everything that follows. This demands a professional who walks into every conversation committed to understanding what's right for that specific person, not just what's available or familiar.

The industry has already moved toward that standard. The professionals who will thrive in it are those who hold themselves to it because they understand the weight of what their clients entrust them with.

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Federico Guardia is the president of PSM Brokerage, an Amerilife company, based in Austin, Texas. Contact him at [email protected].