Déjà vu All Over Again

With the Yankees home opener a little more than an hour from now, it seems that a quote from Yogi Berra may sum up the discussion of annuities held by the Interstate Compact National Standards working group yesterday.
The group, part of the National Association of Insurance Commissioners, Kansas City, Mo., is working on standards for guaranteed living benefits and for guaranteed minimum death benefits for products filed with the Interstate Insurance Products Regulation Commission.
The crux of the issue focused on a request from companies to put a restriction on GLB riders when contracts are sold to institutional investors. The concern expressed by some regulators was that such restrictions would limit a policyholder’s contractual rights and ability to realize the benefit of the rider, even if that benefit was realized through an increased sale value of the contract.
Here’s where the déjà vu part comes in. The argument, at least from the peanut gallery, sounds awfully similar to arguments that were made during the revamp of the NAIC’s Viatical Settlement model act.
Cande Olsen spoke for many of the annuity companies that participated in the discussion, cautioning that if the issue is not addressed there could be a number of unintended consequences such as companies choosing not to file with the IIPRC but rather with states that afforded companies such protection. Other possibilities she raised included a higher cost associated with annuities with GLBs, a restructuring of the product or a reduced availability of the popular feature.
Companies urged that they have options available to them such as the ability to terminate a GLB rider that is not part of the base contract, reject assignments to institutional investors or reset benefits.
Regulators including Joe Musgrove of Arkansas and Tomas Serbinowski of Utah, questioned how this could be done without infringing on a contract holder’s right to make full use of the contract.
John MacBain, speaking for the annuity providers, argued that institutional investors can react more efficiently in the marketplace to which Serbinowski replied that insurers should price more efficiently. But industry countered that to price this new possibility into the market could potentially price these riders out of the market.
The discussion is going to continue with insurers promising to try to bring data back to regulators to make their case.