Industry Groups Slam “Best Interest Standard” As Too Vague
July 20, 2018 by Alex Padalka
Four industry groups representing insurers and banks say current efforts at the federal and state level to impose a best interest standard on the financial services industry will only cause confusion and limit consumer choice when it comes to annuities, ThinkAdvisor writes.
“Requiring producers by law to act in the best interest of a customer may seem innocuous and unremarkable, but the reality is that such a standard is abstract, nebulous, subjective and replete with adverse consequences,” officials from the Independent Insurance Agents & Brokers of America, the American Bankers Association, the National Association of Professional Insurance Agents and the National Association of Health Underwriterswrote in a letter to the National Association of Insurance Commissioners, according to the publication. A NAIC panel is currently looking into a best interest standard for the annuities industry, in part to replace the Department of Labor’s fiduciary rule, ThinkAdvisor writes.
The rule, which purported to require retirement account advisors to put clients’ interests first, was officially vacated by an appeals court last month, but certain states are still working on legislature to introduce similar rules at the state level.
Meanwhile, the National Council of Insurance Legislators, representing state insurance legislators, is also looking into a sales standard for the annuities industry, according to ThinkAdvisor. The letter from the four groups was also sent to NCOIL in time for its meeting earlier this month, according to the publication.
The groups also say vagueness in the best interest standard will lead to “second-guessing and retrospective scrutiny” and “regulatory uncertainty” as well as limiting consumer access to annuities, ThinkAdvisor writes, citing the letter. Instead, the groups suggest regulators address regulatory gaps and consumer confusion with clearer standards on compensation disclosure, according to the publication.
- To read the ThinkAdvisor article cited in this story, click here.
