After years of debate, the National Association of Insurance Commissioners appears poised to approve a “best interest” annuities sales standard by the end of the year.

Up until now, insurance regulators have used a “suitability” standard--similar to Finra’s-- to regulate annuities sales. The new “best interest model,” which is being finalized by NAIC committees in rigorous weekly conference calls that include trade groups and industry representatives, would change the sales standard to “best interest” using the Securities and Exchange Commission’s recent Regulation Best Interest as a model.

“If everything falls into place, the model could be finalized by NAIC by the end of the year and we could begin seeing individual states taking it up for consideration in the first quarter of 2020,” said Jason Berkowitz, Chief Legal and Regulatory Affairs Officer of the Insured Retirement Institute.

According to the latest version of the NAIC annuities exposure draft, “The purpose of this regulation is to require producers to act in the best interest of the consumer when making a recommendation of an annuity and to require insurers to establish and maintain a system to supervise recommendations and to set forth standards and procedures for recommendations to consumers that result in transactions involving annuity products so that the insurance needs and financial objectives of consumers at the time of the transaction are appropriately effectively addressed.”

Once the NAIC approves the regulation, it will be up to each state to adopt it by regulation or legislation, depending on their own procedural requirements.

“I do think we’ll get there,” said Iowa Insurance Commissioner Doug Ommen, who as Chairman of the NAIC’s Life and Annuities (A) Committee has been instrumental in advocating for the new standard.

Ommen, who is also Iowa’s securities commissioner, said he believes that harmonizing annuities sales standards across all regulators will ensure consumers get the same protections whether they’re dealing with a state-regulated insurance agent or an SEC-regulated advisor.

“I’m persuaded that incorporating some of the significant guidance offered by the SEC into the text of our model regulation will elevate the professional responsibility in annuity recommendations to a true best interest obligation,” said Ommen.

In fact, he has lobbied to insert all four Reg BI obligations into the annuities model, which spell out an agents’ requirements regarding: care, disclosure, conflict of interest and documentation.

“That doesn’t mean that every trade association is supporting the model. There are some that are still trying to push back on consumer protection,” noted Ommen, who declined to name the trade groups. “But I think the majority of insurers want to do the right thing by consumers.”

In a move to avoid regulation duplication, the group is also discussing expanding a safe harbor for investment advisor firms whose advisors recommend annuities.

“We have a safe harbor for broker-dealers," Ommen said. "The question now is do we create one that extends to individuals in the investment advisor space. We’re evaluating whether it is OK for an insurer to rely on securities regulation to eliminate the need for insurer supervision and rules. We’re still not there yet. We’ll be talking about it."