NAIC Committee OKs Annuity Suitability Model
InsuranceNewsNet Staff Report
December 22, 2009
An NAIC committee on Monday adopted a final version of the Suitability in Annuities Transactions model regulation.
The model is expected to be voted on by the full National Association of Insurance Commissioners at its spring meeting on March 25-28 in Denver. The NAIC Life Insurance and Annuities Committee unanimously approved the updated model during a conference call on Monday.
During the NAIC winter meeting on Dec. 6, the full committee had delayed the vote on the model for further revision. The changes shift more of the responsibility for producer conduct onto the insurance companies rather than broker/dealers.
A main consequence of the revised model is carriers would have tighter requirements to review products and to provide producer training and oversight. The oversight would include reviewing producers’ annuity recommendations to ensure compliance, which is now handled by broker/dealers.
Kim O'Brien, executive director of the National Association for Fixed Annuities, said the revised model helps protect consumers because it enhances producer training requirements, ensuring producers are knowledgeable about the suitability review process and the products they sell. She also said the model shows states are the best regulator for fixed annuities, citing the Securities and Exchange Commission's Rule 151A to regulate indexed annuities.
"One of the main enhancements to the new model is a secondary suitability review requirement for all annuities," O'Brien said. "This is a complete departure from Rule 151A, which singles out fixed indexed annuities and 'other like products' and prescribes a test designed to intentionally fail every fixed annuity product available today and force them under a secondary layer of regulation, licensing and fees."
This is the amended model version.
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