State insurance regulators are promising to give work on better annuity disclosures a final push so that it can be advanced by October.
Regulators have been working on suitability and annuity disclosure because they say that these products are complex and need to be explained to the public in a better way.
The project is well along, but regulators and industry are still working on several points including when illustrations need to be presented and how to treat fixed annuities that are not regulated by FINRA, Washington. Work on disclosure of variable annuities is designed to parallel FINRA requirements so that the process will be more streamlined.
The discussion took place here during the summer meeting of the National Association of Insurance Commissioners, Kansas City, Mo. The goal, according to Jim Mumford, chair of the annuity disclosure working group and Iowa deputy commissioner, is to work intensely on the draft in September and advance it to the NAIC’s Life & Annuity “A” Committee during its fall meeting in Orlando in October.
Regulators want companies to provide a disclosure if an illustration is provided with a policy. So, if one policy in a policy form is illustrated all of the same policy types would have to be illustrated using a template developed by the American Academy of Actuaries, Washington.
Insurers should have the flexibility to provide disclosure on illustrated policies when they feel it is appropriate, according to Kelly Ireland, senior counsel-insurance regulation, with the American Council of Life Insurers, Washington.
Another issue that will need to be resolved, Mumford said during the working group session, is FINRA safe harbor language which applies when a summary prospectus is filed. However, since a summary prospectus has not yet been approved by the Securities and Exchange Commission, it could not be used to fulfill disclosure requirements, he explained.
The proposed disclosure requirement in combination with other requirements will create duplicative regulation, Kelly explains.
However, even with the need to make changes, there has still been progress made in the model’s development, she adds.