A new conduct model governing annuity transactions moved closer to reality after winning the approval of a key National Association of Insurance Commissioners' (NAIC) committee.
The NAIC Life Insurance and Annuities Committee adopted a model that the NAIC says requires agents to make annuity recommendations with their customers' best interest in mind. That claim has been a subject of controversy, however, with consumer groups and other critics claiming the model does not prescribe a true "best-interest" standard.
In approving the annuity suitability conduct model, the committee kicked certain disclosure provisions back to a working group for further work, albeit with a tight deadline.
The committee is scheduled to meet again via conference call to review and approve the work of the annuity suitability working group and vote the entire model up to NAIC’s Executive Committee and Plenary for consideration at the group’s January conference.
The commission is hoping the set of rules—which by themselves hold no legal authority—will be used as a model by state regulators.
Jason Berkowitz, chief legal and regulatory affairs officer for the Insured Retirement Institute, predicted that many states will be eager to adopt the new annuity model.
“We’ll be pushing for this to be adopted across the country," he said. "I think you will see an early rush of states that will want to get out on this quickly."
The model should also dovetail with best-interest standards being proposed by the SEC, said Bruce Ferguson, American Council of Life Insurers senior vice president for state relations.
“Together, these two initiatives will significantly strengthen protections for consumers seeking guaranteed lifetime income in retirement through annuities,” Ferguson added.
Once the NAIC Executive Committee and Plenary approve the annuity sales rule, it becomes an official NAIC model law and is sent to the states for adoption.