Insurance regulators are in preliminary discussions about crafting fiduciary-like annuity sales and advice standards at the state level, according to industry representatives and consumer advocates.
A new group to handle potential enhancements to an existing framework, as well as to develop a possible best-interest standard of care for the sale of annuities, will meet at the spring national conference of the National Association of Insurance Commissioners. A panel of industry representatives and consumer advocates is slated to speak at the meeting, according to the conference agenda.
The existing model law is known as the Suitability in Annuity Transactions Model Regulation. States have to adopt by regulation, or pass via the state legislature, the model laws in order for them to become standards.
The potential enhancements to the model law come at a time when the Trump administration has put the brakes on the Department of Labor's Conflict of Interest Rule, otherwise known as the fiduciary standard, which the supporters said was aimed at ensuring customer interests come first when advisers give retirement advice and sell products like annuities. The Labor Department has proposed to delay the fiduciary rule's applicability date by 60 days to allow for more time to examine whether to scrap the rule altogether.
The NAIC's effort is seen as a way for the life insurance industry to make sure that any future federal and state regulations dealing with sales and advice in insurance products are in harmony with each other. Although the NAIC has long labored to devise a regulatory framework that holds insurers responsible for offering suitable annuity products, regulators plan to increase their focus on the state level, according to industry sources.
Birny Birnbaum, a consumer advocate and economist with the Center for Economic Justice, said the NAIC's new Annuity Suitability Working Group was formed at the request of the Idaho insurance commissioner and seconded by Iowa on a conference call this past winter. Iowa's commissioner had mentioned an interest in a fiduciary standard although Idaho was interested in a broader, more uniform adoption of an existing model law on annuity sales, with some improvements, Birnbaum noted.
Birnbaum said that the Center for Economic Justice would oppose any action by the NAIC to fight the delay or watering-down of the Labor Department's rule, and heard from regulators that this was not the intent of its new work. The Iowa Division of Insurance declined to say whether the new working group's effort was to create any kind of state-based fiduciary rule proposal.
Iowa's insurance regulator is not yet advocating for any change to the existing suitability rule, but it does want a public discussion on disclosure, a spokesperson said.
Iowa Insurance Commissioner Doug Ommen in an emailed statement said he looks forward to discussing a "consistent, common-sense approach regarding disclosure of compensation" and "ensuring sellers deal fairly with consumers." Ommen is vice chair of the new working group, which is chaired by Idaho's top insurance regulator, Dean Cameron.