Annuity Suitability Model Advances to Final NAIC Votes
December 31, 2009 by Sean P. Carr
WASHINGTON December 29 (BestWire) — A stricter model act for the suitability of annuity sales has advanced to a final vote by the National Association of Insurance Commissioners. BN-NJ-12-29-2009 1624 ET #
The NAIC’s Life Insurance and Annuities Committee approved the draft model in a conference call vote on Dec. 21. The Executive Committee and Plenary will vote on the model act when the NAIC holds its Spring National Meeting in March.
The Suitability of Annuity Sales Working Group backed the draft model in a Dec. 1 vote (BestWire, Dec. 7, 2009). It tightens rules on agent training and requires insurance companies to more strictly review products and transactions for suitability concerns, a responsibility that may be delegated to broker-dealers or third parties under the current model. It also holds insurers accountable for actions taken by producers in selling their products.
In order to win unanimous support from the full committee, small concessions were made that, in part, produce less-strict obligations on insurers to verify that customer suitability information is accurate, said Wisconsin Insurance Commissioner Sean Dilweg, chairman of the working group. Still, “this is definitely a step forward,” Dilweg said.
Supporters said the new model better addresses regulatory and marketplace changes affecting customers of all ages since the model was last revised in 2006. The current model also sought to impose on life insurers an express obligation to ensure their variable annuities are sold to suitable parties.
“Annuities are more popular now in the economic climate,” Dilweg said. “People are looking for safer investments.”
The draft model is a good-faith effort to protect consumers’ interests, but further interpretive guidance is needed, said Steven Brostoff, spokesman for the American Council of Life Insurers.
“Key provisions in the model remain open to interpretation that could lead to a lack of uniform adoption in the states. As a result, protections for consumers in annuity sales could vary depending on where they live,” he said.
(By Sean P. Carr, Washington Correspondent: sean.carr@ambest.com)
