Six states are moving forward to adopt new best interest standards for annuities, which were adopted by the National Association of Insurance Commissioners (NAIC) in February.

The new “Suitability in Annuity Transactions Model” regulation uses the Securities and Exchange Commission’s best interest standard of conduct and requires insurers and advisors to “act in the best interest of the consumer when recommending or selling an annuity.” The rule applies to fixed and fixed-index annuities. Variable annuities fall under SEC jurisdiction.

While Arizona and Iowa have already adopted the model regulation, Arkansas and Rhode Island are currently working on adoption and Kentucky, Michigan, Nevada, and Ohio are moving toward adoption, according to the Insured Retirement Institute, a trade group that represents the annuity industry.

“IRI is closely monitoring these developments and advocating for adoption of the NAIC model regulation,” IRI spokesman Dan Zielinski told Financial Advisor Magazine.

IRI, is, however, advocating for safe harbor provisions from the state annuity rule for companies and advisors who are already regulated under the SEC’s Regulation Best Interest. The association is also advocating for consistent implementation of the model state-by-state, IRI executives are expected to tell the Arkansas Insurance Department, which is holding a hearing today on its proposal, according to written testimony.

The Financial Services Institute and the American Council of Life Insurers has joined IRI in advocating for the safe harbor provisions from the state annuities rule.

They concede that insurers will have “important supervisory obligations with respect to annuity recommendations made by financial professionals relying on the safe harbor,” specifically to “not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer’s financial situation, insurance needs and financial objectives based on the consumer’s consumer profile information,” the groups said in a joint trade group statement.

IRI and its sister trade groups are also seeking a safe harbor from providing additional disclosures if advisors and producers meet the disclosure requirements imposed under Reg BI and Form CRS, which spell out what products and services an advisor provides and the compensation he or she charges.

While the NAIC model requires state advisors to take a four-hour training course to sell annuities, the trade groups are also asking regulators to clarify that there is a safe harbor if advisors have taken “comparable” training.

The trade groups are also advocating that insurers be exempt from the new annuities best interest rule if consumers respond to a direct-response solicitation “through mails, telephone, the Internet, a digital platform, or other mass communication media that does not involve a communication directed to a specific individual by a natural person, or by a simulated human voice.”

“This regulation is a significant enhancement to the standard that applies when producers recommend annuities to their clients,” said written testimony from Jason Berkowitz, IRI’s Chief Legal & Regulatory Affairs Officer. ”We commend Arkansas for its leadership in connection with the development of the revised model and for undertaking to be an early adopter. We hope to see other states follow your lead into 2021.”