The National Association of Insurance Commissioners is reconsidering its draft proposal on annuity sales standards in light of the U.S. Court of Appeals for the 5th Circuit decision vacating the Department of Labor's Conflict of Interest Rule.
"After visiting with our leadership, we feel that we should take a bit of a breath, but not a long breath," Dean Cameron, chair of the NAIC's Annuity Suitability Working Group and Idaho's insurance director, said during the NAIC's spring national meeting in Milwaukee. The NAIC is the standard-setting body for state insurance regulatory bodies.
Insurance industry representatives testifying before the NAIC working group March 24 supported extra time to rethink an NAIC standard of care for annuity sales.
"Without the constraints of the DOL rule, we are now free to think about issues on "a higher level," Jason Berkowitz, vice president and counsel for regulatory affairs for the Insured Retirement Institute, an industry trade group for the retirement income industry, said after testifying before the working group.
Cameron reopened the closed comment period for the NAIC's draft for proposed revisions to a model regulation governing annuity transactions. The working group will accept comment letters for 30 days on recommendations for how to proceed with developing an updated annuity suitability standard due to the court's decision on the controversial fiduciary rule.
Cameron hopes a working document that NAIC leadership could use in its discussions with the Securities and Exchange Commission will be ready soon. The SEC is expected to move forward with its own fiduciary standard for retail investment products such as annuities.
Cameron said after the working group meeting that he is seeking more disclosure of any conflicts of interest in the updated model law and language to address agent and broker cash and noncash compensation. Additionally, the model law will not apply to life insurance transactions, unlike the best interest standard the New York Department of Financial Services has proposed and is now pursuing. In announcing the proposed rule in December 2017, the department said the rule is "aligned with recently delayed federal regulations relating to retirement savings."
New York Department of Financial Services Superintendent Maria Vullo told S&P Global Market Intelligence that the court decision has no impact on New York's proposed rule. Vullo thinks there must be a best interest standard for life insurance and that sales commissions overall should not be tied to the product sold. In most cases, the simpler product is the better one for the individual, she noted. New York has submitted its proposed rule to the NAIC for consideration.