A much debated change to an annuity suitability model regulation was unanimously adopted by the Life and Annuities “A” Committee of the National Association of Insurance Commissioners, Kansas City, Mo., on December 21.
The revised model will now be presented to the NAIC’s executive committee and plenary for full adoption. The “A” Committee had received the work of the Annuity Suitability working group during the NAIC’s winter meeting Dec. 5-10 in San Francisco. During that meeting, Connecticut Insurance Commissioner Tom Sullivan deferred a vote for two weeks so that the revised draft could be read and limited technical comments submitted.
In an interview with The Insurance Bellwether, Sullivan explained that he wanted to strike a balance. “I didn’t want to accept the draft in too hasty a fashion,” he said. But, Sullivan added, “I also did not want to unearth or undo all the hard work of the working group.” In November, the working group voted 13-2 to advance the revised draft model to the “A” Committee. California and Vermont voted against moving the model, citing the need for further work, maintaining that the changes did not go far enough to protect consumers.
Sullivan said that “it is the role of regulators to protect consumers. This is all about providing a stronger consumer-friendly model.”
The model tried to parallel whenever possible, requirements developed by FINRA, New York. One of the important features in the revised model, he continued, is the requirement that the recommendation be reviewed at the company level so that a second set of eyes studies the producer’s recommendation.
The American Council of Life Insurers, Washington, had expressed support for the concept of suitability protections for consumers, but said that it could not support the revisions because of factors that included placing too much strict liability on companies to make sure that a transaction is suitable.
Sullivan said that while he appreciated those concerns, the model also reflects the reality that because of human nature, “there cannot be a cop on every corner.” But he said that points in the model including holding an insurer responsible for suitability even if oversight is being handled by a third party, is important for consumer protection.