NAIC Annuity Standard of Care Model Act on the way…
State regulators from across the country gathered in midtown Manhattan earlier this month for the NAIC Summer Meeting. While no earth-shattering developments took place during the meeting, the Annuity Suitability Working Group took steps to fast track the “Standard of Care” Model Act that, while not “fraternal specific,” will certainly have an impact on your operations and those of your field force.
The methodical pace at which the NAIC has addressed the annuity suitability issue is likely to gain steam in the coming weeks as Ohio Insurance Commissioner and Annuity Suitability Working Group Chair Jillian Froment announced that the Working Group would be meeting frequently in the coming weeks and hopes to issue a draft of the proposed Model Act by mid-September. Based on feedback from regulators, industry representatives and consumer groups, the draft could be ready for consideration by the Life Insurance (A) Committee in December.
Among the most provocative issues discussed during the Working Group’s meeting in New York were those attempting to define what it means to provide a “reasonable basis to believe a consumer would benefit from the purchase of an annuity”; whether the annuity product would address consumers’ needs; and the obligation to obtain consumers’ signatures in the event they refuse to disclose their financial status. Based on my conversations with member society executives attending the Alliance’s regional meeting in Pennsylvania last month, the last of these – consumers’ refusal to disclose their financial information – may have a significant impact on smaller and ethnic-based fraternals whose members may be more hesitant to provide this type of financial data within such small and close-knit communities.
The proposed solution to these and other issues, including an agent’s duty to tell consumers about competitor’s products, bears watching. The Alliance is a member of a broad-based industry coalition that will carefully analyze the draft regulation and submit comments that represent an industry-wide view of the proposal. Individual groups may submit additional comment letters focused on specific issues unique to their organizations or constituencies.
Bottom line: Stay tuned. There is much more coming on this issue that you will need to know. The Alliance’s newly-formed Advocacy and Policy Committee will review the measure and recommend to the Board the best course of action for the fraternal community. Without a doubt, one component of our response will be a robust education and information program so that member societies have all the information they need to understand the implications of the NAIC Model Act and be prepared to comply with whatever versions of the Model Act are ultimately adopted by individual states.
Blog Break: I’ve got a really important grandchild-sitting engagement this week, so you won’t see a blog post on Monday August 19. I’ll be back at it the following week. Thanks!