NEW YORK - Despite the appearance of some hiccups, a senior annuity sales suitability model regulation will be approved in time for the fall meeting of the National Association of Insurance Commissioners (NAIC) of Kansas City, Mo.
Merwin Stewart, chairman of the life insurance and annuities committee and commissioner of the Utah Insurance Department, affirmed the committee's plans during a summary session here at the summer meeting of the NAIC.
The committee plans on going to Chicago with an approved model regulation in hand that will put to rest an effort that began four years ago. Since, the model has changed significantly from its origins as a model law and regulation to govern the sale of all fixed annuities. Many thought the initiative was dead last year after vigorous complaints from industry, producer and consumer groups alike (AMN, July 2002).
However, suitability was resuscitated under the guidance of Jim Poolman, commissioner of the North Dakota Department of Insurance (AMN, April 2003), who admonished the industry for lack of consensus. The industry has since responded to language and amendments in the new model regulation. The model law was nixed altogether.
While this year's model was intended to address fixed annuities, variable annuities and variable life, it has now been changed to include only annuities. Also, the industry successfully lobbied for the NAIC to accept existing regulations from the National Association of Securities Dealers in Washington that already govern variable annuities. Furthermore, once the NASD has taken action on a violation, the states are not allowed to mete additional punishment.
One final conference call will shore up language in the model regulation and give the committee time to vote to accept it before the September meeting, Stewart said. "For the most part, we are in agreement with proposed changes," he said. "We are very close to getting this thing wrapped up."
Stewart stressed that the commissioners "don't want to over-regulate" the sale of annuities and have been "working with the industry to make sure that we are doing it with efficiency."
Progress on the draft stalled after two rocky conference calls prior to the New York meeting, but negotiation and compromise appear to have reached a final stage. Representatives from the Wisconsin Department of Insurance presented language that comes from a regulation on sales suitability and supervision that they plan on implementing in their own state.
Industry observers have noted that the Wisconsin language was a curve ball thrown into an already rushed and pressured process. Even so, Linda Lanam, vice president of annuities at the American Council of Life Insurers of Washington presented alterations, without which the ACLI is "not prepared to give support at this time."
Ron Panneton, senior counsel with the National Association of Insurance and Financial Advisors of Falls Church, Va., challenged Lanam's proposal, expressing concern that the model regulation does not adequately assure that corrective action will be taken on behalf of the customer and that the NAIC is catering more to the interests of the carrier than it is protecting consumers.
"I don't get it. You don't think this [protects the consumer]?" Poolman said. "The state has the hammer. The company then has a program in place to also take corrective action."
When Panneton continued to argue his case, Poolman said, "I think we're there. This discussion could be futile when I think what could happen here is there is a potential conflict in the works."
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