A National Association of Insurance Commissioners working group has voted to kick the can down the road on its controversial fiduciary standard, opting instead to open up another 30-day comment period on the proposed annuity sales standard.
The disrupting factor, not surprisingly, is the March 15 Fifth Circuit Court of Appeals decision vacating the entire Department of Labor fiduciary regulation, which had influenced the NAIC’s model regulation: Suitability and Best Interests Standard of Conduct in Annuity Transactions.
The NAIC has been attempting to adopt a model law governing the sales of annuities for the past year and a half. But instead of scheduled section-by-section debate and revision on the proposed model act, Working Group Chairman Dean Cameron asked NAIC counsel to provide the group with analysis of the impact of the DOL decision.
Members of the committee, which met in late March in Milwaukee, agreed that the Fifth Circuit decision gives the NAIC an opportunity to pause, rather than react to the DOL rule. This presents regulators with the opportunity to objectively identify and address gaps and deficiencies in the current model regulation, according to analysis from Eversheds Sutherland.
The group voted to finalize the fiduciary model last year and its original comment period closed January 20, but putting the finishing touches on the rule has been an elusive battle with very few changes agreed upon, one regulatory source told Financial Advisor magazine.
Cameron, who is also Idaho insurance commissioner, had predicted that the final model law would be completed and voted on at the NAIC spring meeting in Milwaukee March 24-25.
But the group was unable to reach agreement, opting for another round of comments instead. The new comment period will run until Friday, April 27. Comments should be sent to Jolie Matthews, senior health and life policy counsel at NAIC, at [email protected].
Cameron said he wants to see specific comments on suggested revisions to the model that would establish a best interest/consumer-focused approach and process for the sale of annuity products to consumers. He also said that as the Securities and Exchange Commission moves forward with its own best interest standard proposal by second quarter, he would like to have an annuity best interest model to NAIC leadership for review in the next few months, according to Eversheds Sutherland.
Cameron said the NAIC’s working group would meet again in May to discuss the new round of comments.
The NAIC model would place limits on agent compensation, require more conflict of interest disclosures and set a “best interest” standard, albeit one that would apply to annuity sales only.