By John Hilton
February 13, 2020
State
insurance commissioners voted today to sent a strengthened annuity sales model
law that adds a best-interest standard to the states for adoption.
The
successful vote came over the strenuous objections of New York Superintendent
of Financial Services Linda Lacewell.
"I
believe the role of the NAIC should be to lift all states up and not just be
the common denominator of what can be agreed to by 50 states plus
territories," Lacewell said.
She was
supported by California Insurance Commissioner Ricardo Lara, who voted in favor
of the model. But Lara added that he supports getting regulators to a fiduciary
rule as soon as possible.
"While
I believe this law is not perfect," Lara said, "overall for
California it would be better for consumers than the existing
regulations."
The model
articulates a best-interest standard through the following four obligations:
care, disclosure, conflict of interest and documentation.
The new
regulations will commit the agent to extra work and documentation to establish
the consumer's profile. Agents will need to find out and document things like a
consumer's financial situation, insurance needs and financial objectives.
The
rule specifically does not establish a fiduciary duty, nor does it ban agents
from recommending products with a higher compensation structure. But the agent
must be able to show that such a recommendation is in the consumer's best
interest.
Industry
Support
The
final rule was embraced by industry trade associations fresh off defeating the
Obama administration fiduciary rule.
The Insured
Retirement Institute supports the revised model and says it is consistent with
the U.S. Securities and Exchange Commission’s Regulation Best Interest (Reg
BI), which companies must comply with by June 30.
Similar
to Reg BI, the model regulation says that insurance producers shall act in the
best interest of the consumer under the circumstances known at the time a
recommendation is made, without placing the producer’s or the insurer’s
financial interest ahead of the consumer’s interest.
“The
NAIC model regulation is a significant enhancement to the standard that applies
when producers recommend annuities to their clients,” said Wayne Chopus, IRI
president and CEO. “We urge states to move quickly to adopt this new
regulation.”
The
NAIC proposal also includes IRI-recommended language to provide a safe harbor
for all insurance producers who are subject to, and actually comply with,
comparable or greater standards such as requirements for those who already
comply with rigorous standards.
IRI said that it expects many states will be eager to adopt the new annuity model.
IRI said that it expects many states will be eager to adopt the new annuity model.
“Strong,
consistent regulation is important to protect consumers and to preserve
consumers’ choice of financial advice and products that meet their financial
and retirement planning needs,” Chopus said. “We look forward to working with
states to implement this important regulation.”
InsuranceNewsNet
Senior Editor John Hilton has covered business and other beats in more than 20
years of daily journalism. John may be reached at john.hilton@innfeedback.com.
Follow him on Twitter @INNJohnH.
©
Entire contents copyright 2020 by InsuranceNewsNet.com Inc. All rights
reserved. No part of this article may be reprinted without the expressed
written consent from InsuranceNewsNet.com.
No comments:
Post a Comment