Jackson National announced that it suspended the sale of fee-based annuities in New York last month due to the implementation of a new fiduciary regulation.
At issue is Insurance Regulation 187, which requires that insurers offer consumers a comparison showing the differences between fee- and commissioned-based annuities.
Jackson temporarily halted the annuity sales on Aug. 12 "as we and other market participants continue to work through the product disclosure requirements in Regulation 187 with the New York Department of Financial Services,” said a Jackson spokesperson. “We remain committed to delivering helpful and relevant disclosures to consumers and distribution partners and to resuming sales of our advisory products in New York as soon as possible.”
The company is continuing to sell its commission-based annuity products in New York.
The disclosure requirements could force Jackson and other annuity providers to offer clients comparisons between products when the same annuity is available in New York in both fee- and commission-based form, said Jason Berkowitz, chief legal and regulatory affairs officer for the Insured Retirement Institute.
"There's some confusion as to the extent that that disclosure may have to cover a broader swath of products and at what point the regulator would be looking for us to provide that disclosure," said Berkowitz. "Our members area deeply committed to complying with the word of the law, but in this instance they're not sure what that means. They're temporarily holding off on keeping these fee-based products on the market."
New York adopted one of the strictest fiduciary regulations in the nation last month when it required that insurance agents act in their customers’ best interests as part of a slate of new consumer disclosure requirements. The rule was proposed in July 2018 by the state’s Department of Financial Services and took effect on Aug. 1 for annuity contracts. It will go into effect Feb. 1 for life insurance policies.
David Lau, CEO of DPL Financial Partners, which offers advisors a platform of fee-based, non-commissioned annuity products, said that Jackson and at least one other annuity provider are halting the sale of fee-based products in New York until further clarification on the regulation is provided by state regulators.
“It’s a new regulation, and oftentimes with new regulations they haven’t yet contemplated all of the different aspects of what it will mean to be in compliance,” said Lau.
Just before the rules went into effect for annuity sales, the New York State Supreme Court upheld the regulation in a strongly worded opinion after two industry organizations—the Independent Insurance Agents and Brokers of New York and the National Association of Insurance and Financial Advisors-New York State—asked the court to block enforcement of the new rules.