The Missouri Department of Insurance has filed new rules that would affect the sales of variable annuities within the state. This follows jurisdictional wrangling (see AMN coverage: VA Industry Argues Against Dual Regulation in Missouri; Missouri Regulators Battle Over VAs) between the department and the Missouri Secretary of State, who has been arguing that the products should also be regulated as securities within the state.
To help resolve the issue, Governor Matt Blunt requested a hearing on the matter that brought regulators together with industry and consumer groups.
The new Department of Insurance rules would help fill an existing regulatory gap within the state, under which there are no explicit requirements that the sale of a variable annuity be suitable for consumers. The rules are modeled after existing rules from the NASD and will give state regulators the ability to discipline agents who do not comply.
"It is important to note that consumer representatives and the Missouri Association of Insurance Agents are supporting our efforts to require all insurance professionals to place the interest of the consumer first in the sale of variable annuities," said Insurance Director Dale Finke.
The issue of variable annuities is important within the state because of the precipitous rise of sales in the past decade. Total sales between 1993 and 2004 went up 1443%, with consumers paying nearly $1.7 billion in premiums in 2004. The Department of Insurance expressed concern that commissions for variable annuities are often high, and some consumers have been sold the products unsuitably.
In a curious addendum to the statement regarding variable annuity rules, the Department of Insurance pointed out that the new rules will not cover equity indexed annuities (EIAs), which are currently considered a type of fixed annuity, but that the state said has "many of the same investment features as a variable annuity."
EIA sales are up in the state, with an 81% jump in premium between 2003 and 2004, from $147 million to $267 million.