Virginia and Alabama became the latest pair of states to adopt updated annuity sales rules based on a National Association of Insurance Commissioners' model regulation.
They become the 13th and 14th states to adopt the new standard, which basically applies a "best interest" update to existing annuity suitability rules.
Adopted in February, the NAIC model law articulates the best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation.
The rule specifically does not establish a fiduciary duty, nor does it ban agents from recommending products with a higher compensation structure. But the agent must be able to show that such a recommendation is in the consumer's best interest.
The continued activity at the state level comes as the Biden administration is signaling a desire to return to the fiduciary style rule published by the Obama DOL in 2016.
The DOL’s spring 2021 Regulatory Agenda confirms that it will be rewriting the definition of fiduciary. The Employee Benefits Security Administration plans to issue the notice of rulemaking by December 2021, the agenda stated.
If the administration follows through, the issue will most certainly end up back in court. In the meantime, Susan Neely, president and CEO of the American Council of Life Insurers, noted the fear of running out of money remains one of the biggest retirement concerns.
ACLI supports the best-interest standard.
"New rules like Virginia’s support the goals of this legislation and give retirement savers the access they need to learn how annuities can help them secure peace of mind no matter how long they live," Neely said.