Plan for New Annuity Model Continues at NAIC

A National Association of Insurance Commissioners working group will continue consideration of a new model act on annuity sales suitability following comments from insurers and others that questioned the need for a new measure.

Wisconsin Insurance Commissioner Sean Dilweg said the current Suitability in Annuity Transactions Model Regulation, adopted in 2006, should be revised to match regulatory and marketplace changes. Among other changes, the revised draft would tighten rules on agent training and more tightly hold insurance companies accountable for reviewing products and transactions for suitability concerns, Dilweg said. Currently, companies may delegate that responsibility to broker-dealers or third parties, he said.

"We need to do something. The current model is too wide open," said Dilweg, chairman of the Suitability of Annuity Sales Working Group.

The changes would also more closely match the model law to actions taken by the Financial Industry Regulatory Authority and being considered by the U.S. Securities and Exchange Commission, Dilweg said.

In comments to the working group, industry representatives questioned the need for a new model, with some saying any need for more specificity could be handled through other means.

The Insured Retirement Institute, which recently changed its name from NAVA -- the Association for Insured Retirement Solutions, wrote than an advisory model bulletin would clarify expectations for regulators and insurers and accomplish many of the same goals.

The Ohio Department of Insurance said the focus should be on developing uniform enforcement procedures for the current model and persuading more states to adopt it.

The current model, which applies to consumers of all ages, seeks to impose on life insurers an express obligation to ensure their variable annuities are sold to suitable parties. It also imposes suitability requirements on the purchase or exchange of fixed annuity policies, similar to the federal requirements imposed on broker-dealers and other investment advisers for variable annuity sales (BestWire, Feb. 25, 2008).