Connecticut Insurance Commissioner Thomas Sullivan released draft regulatory guidance for adopted amendments to the Suitability in Annuity Transactions Model Regulation approved by the Life Insurance and Annuities “A” Committee of the National Association of Insurance Commissioners, Kansas City, Mo.
The amendments will be considered during the spring NAIC meeting in Denver on March 25-28.
The guidance was drafted by insurance regulators in several states. Sullivan, the chair of the “A” Committee, released the document in conjunction with North Dakota Insurance Commissioner Adam Hamm, “A” Committee vice chair. He noted that both he and Hamm had originally intended for the document to be shared only by regulators but “in the spirit of transparency, we are sharing it with interested parties prior to the Denver meeting.”
The document states that the model was adopted to:
--Establish a regulatory framework that holds insurers responsible for ensuring that that annuity transactions are suitable (based on the criteria in Sec. 5I), whether or not the insurer contracts with a third party to supervise or monitor the recommendations made in the marketing and sale of annuities;
--Require that producers be trained on the provisions of annuities in general, and the specific products they are selling; and,
--Where feasible and rational, to make these suitability standards consistent with the suitability standards imposed by the Financial Industry Regulatory Authority (FINRA).
It describes some of the changes made during the NAIC winter meeting and states that “Insurers are responsible for any unsuitable annuity transactions – regardless of whether it is due to the action or inaction of the insurer or the producer and regardless of whether the insurer contracts with a third party to supervise or monitor the recommendations made.”
And, according to the released document, “an insurer will also be expected – and may be ordered -- to take reasonably appropriate corrective action for any consumer harmed by the insurer’s violation of the regulation, or its producer’s violation.”
Producers will also be held accountable, according to the document which says that “General agencies, independent agencies and insurance producers will be expected – and may be ordered -- to take reasonably appropriate corrective action for any consumer harmed by a producer’s violation of the regulation.”